That 22bn

So it looks like we are heading for austerity mk2. 22bn sounds like a lot. But if we spend 1100bn and borrow circa 180bn a year in the overall scale of things what’s the issue? We obviously need a rethink / higher taxes but is it really that gloomy an outlook?

40 odd billion lost to the HMRC every year because of Brexit ( and rising) Why don’t we start there?

I thought the Brexit loss in GDP was more in the region of £85bn per annum, but I may be wrong.

Seems like a good place to start, though. Whatever the numbers.

I believe the GDP numbers were above 100bn per year, the figure of 40bn, is taxes lost to the exchequer . Either way, austerity mk2 surely holds the country back again?

Yep, going by his speech just now it sounds like the British public will be paying for all this again.

All this recent stuff coming out about cronyism and recent appointments doesn’t fill me with any optimism either.

We all knew this was coming, the Tories knew for almost 3 years that they were heading for likely electoral oblivion so all long-term thinking went out the window as they tried to cling onto power and worry about the mess after the election. There were plenty of quotes from anonymous civil servants in the last year along the lines of “They’re just smashing things up now.”

Also, the worse that people think the situation is now, the lower expectations will be and the more credit Starmer and Reeves will get assuming the economy and public sector haven’t completely collapsed by the time the next GE roll around.

So it’s both at least somewhat true and politically advantageous, which means we’ll be hearing this line regularly for the foreseeable.

I guess we knew there would be some tax increases, it’s where and how we wait on.   They pledged no more vat, ni or income tax so that doesn’t leave much.  Iht and pensions were/are the next piece to look at.   Those don’t fit with the message that October budget will feel hard though so they?

We have 2 months more waiting.

Fuel duty is the obvious – but not politically palatable – one.

It’s been frozen since 2011, then it got further cut by 5p/litre in Covid, that was never put back, that’s £50 billion lost revenue in the last 12 years.

And given the rise in EV / hybrid use, the whole thing probably needs an overhaul anyway.

I already pay income tax on my modest pension, why not tax the better off.

What about a super car tax, Range Rover tax.

There are people who’s annual bonus makes my lifetime earnings look pitiful  plenty of scope for taxes their.

They are mid blue Tories and I am sure the founders of the Labour Party will be rotating.

I believe the GDP numbers were above 100bn per year, the figure of 40bn, is taxes lost to the exchequer . Either way, austerity mk2 surely holds the country back again?

I was looking at it from the POV of £100bn lost ‘in’ offset by c. £13bn ‘out’ that we no longer contributed.

But if it’s £85bn or £100bn or £40bn and we’re looking at Austerity Mk2 versus just clawing back what we chucked away to zero advantage…

I know where I’d be heading – Brussels.

In office but not in power.Same old same old.

Starmer and Reeves are wrong, we should use MMT and spend more, Richard Murphy said so!

Fortunately the austerity doctrine has proved to be so successful over the past 15 years that we can now just discard any opportunity to change and just keep doing the same thing again. I believe they call it grown up politics, although to me it looks more like a dogmatic adherence to continued failure.

Starmer and Reeves are wrong, we should use MMT and spend more

I could quibble with the statement that you ‘use’ MMT, but instead I’ll just ask – do you have a better idea?

Two years ago Liz Truss had a mini budget with tax cuts galore, look how that ended.

She prioritised tax cuts to the money hoarders not the general public, and was still based on cutting services and investment to pay for them. But it is quite amusing how desperate you are to try and tie the economic failures of the past 15 years to MMT rather than the economic policy of austerity and cuts and that was actually in place and is now being continued.

I’m not tying it to MMT, as that’s not been used by the UK as a standalone way of managing the governments finances, the main crux is that any budget will be worked up by an entire department, it will be reviewed by the OBR, it will then be graded by the world markets, it’s not a couple of cabinet members on the back of a fag packet, well Truss’ mini budget was, but that was their downfall.

My slightly draconian approach would be to start with getting rid of non dom status and they requiring everyone who holds a U.K. passport to be liable for U.K. taxes wherever in the world it’s earnt. If you want the benefits of  being a U.K. citizen and passport holder then should should be liable for tax. I’m happy to have a lower rate for overseas earnings but the principle should be upheld.

Two years ago Liz Truss had a mini budget with tax cuts galore

There’s a massive difference between cutting taxes to give money to people who already have plenty, and spending money on infrastructure and services, which puts money into the hands of people who will spend it, which means that most of it comes back to the treasury eventually.

I’m not seeing the relevance of the Truss budget here. I think the US Inflation Reduction Act is a better example of how a government is attempting to reduce its deficit through infrastructure investment.

Should we accept that we aren’t prosperous enough a country to have some of the nice things we used to?

It seems to me that we are enjoying public and private luxuries in goods and services, that far outstrips any genuinely useful work we do. That applies collectively and as individuals.

@bikesandboots

Rubish there’s plenty of money it just needs a fundamental redistribution of wealth. have you not noticed that the poor have been disposesed while the rich prosper and the services people use are run down so that private enterprise can make profits.

This country has been run for the benefit of the well off it’s time to change things.

Fuel duty is the obvious

fuel duty is a generally regressive tax (high earners spend a lot less of their income of fuel, comparatively), so its a tricky one for labour to hike.

It seems they’re going to cap tax savings on pension contributions, which will presumably be a double-win – you’ll get more tax up-front out of savings that are made, and you will discourage savings among high earners, which will make people spend more (boosting the economy). Everyone having less money in 30 years time is not the current governments problem

Keir Starmer in his garden speech today ” … short term pain for long term growth …”

LOL! Didn’t we hear that somewhere before?

We will all be dead from the short term pain, let alone waiting for the long term growth!

If this “short term pain” has become unbearable, I can only foresee Labour as short one term govt.

To imply that the few “rich” is going to bear the burden of tax is a rather good publicity stunt but this will only buy some time in govt.

Not much has changed and it’s just typical day in office.

There are many reports attributing 2,500 deaths per year to Margaret Thatcher. I hope someone has started the counter for Keir Starmer and that all the folk on this forum that were saying “Keir Starmer might be saying that now but it’ll all change when he gets into power” are pleased with themselves.

Should we accept that we aren’t prosperous enough a country to have some of the nice things we used to?

Yes, there is a lot of truth in that.  It is not the country it was 30 years ago so the average person will be worse off.  Of course that is not helped by higher % of income going on rent/mortgage due to ridiculous house prices but I am sure Starmer has a plan to sort that out, he just hasn’t mentioned it yet.

There were a few of us who were predicting how Starmer’s government would pan out and it is going as we said.  He will be out in 5 years time as quite rightly people will ask “what was the point of that” and go back to the tory party they voted for before.

 I hope someone has started the counter for Keir Starmer and that all the folk on this forum that were saying “Keir Starmer might be saying that now but it’ll all change when he gets into power” are pleased with themselves.

We will all be sweating from our backside or having wet fart soon when the monthly bills arrive.

It’s both bizarre and depressing: Reeves and Starmer are gaslighting the entire country with this “black hole” nonsense. There’s no such hole and any basic understanding of economics works makes that plain to see.

Ever since the narrative the country had “maxed out its credit card”, politicians have lied constantly about how the countries finances work, and what is possible and what is not, this is especially true how the Tories dealt with the threat of an anti-austerity Labour Party under Corbyn, insultingly taking about a “magic money tree”, which incidentally, did magically appear in 2020. The same applies to Reeve’s “black hole” excuse.

The fact is, Brexit and Covid have compounded the damage of a dysfunctional economic system. There’s nothing left to asset strip now and this has resulted in very persistent inflation among many other problems. Inflation needs to be addressed by removing currency from circulation; however, it will be the workers and the poor and vulnerable who pay for it because they are the least well position to oppose it.

I don’t think there’s any ambiguity here: this is managed decline and unless there’s radical social change, which in this country would look like a revolution, it is here to stay.

It is not the country it was 30 years ago so the average person will be worse off.

I’m not sure that’s demonstratably true. General standards of living have risen massively in the last 30 years – we have the internet, nearly everyone has (much larger) tv (with more channels), food and clothes are way cheaper than they were back then, cars last a lot longer, are faster, more comfortable and use less fuel, people live longer, more diseases are cured and so on. Housing has certainly got more expensive (and so you’re likely to be “worse off” than the equivilent worker was by that metric) but almost everything else is cheaper and more widespread.

take 10 years ago as your market and you might have had a point (although general progress will have wiped a lot of that out too).

It seems they’re going to cap tax savings on pension contributions

It does seem pretty unfair that I get tax relief at the higher rate on all of my contributions, despite paying higher rate income tax on a marginal basis.

requiring everyone who holds a U.K. passport to be liable for U.K. taxes wherever in the world it’s earnt

This is what the US does, pretty much.

I already pay income tax on my modest pension, why not tax the better off.

The thing about tax is everyone agrees that someone else should pay more of it. And the top one percent of earners already pay 30% of the total income tax revenue, so one has to be careful when saying “the rich’ don’t pay ‘enough”.

Things like pension tax reform seem reasonable though – a huge number of people are saving 40% on their contributions for future income that will probably be taxed at 20%, which seems a little unfair.

My slightly draconian approach would be to start with getting rid of non dom status and they requiring everyone who holds a U.K. passport to be liable for U.K. taxes wherever in the world it’s earnt. If you want the benefits of being a U.K. citizen and passport holder then should should be liable for tax. I’m happy to have a lower rate for overseas earnings but the principle should be upheld.

There are double taxation deals in place with a lot of countries… I pay a crazy amount of tax to the Spanish government on my Spanish income… But as I’ve ‘already paid it’ I can offset it against my HMRC liability.

Non-dom is different though… It allows, for example the super rich to domicile themselves in the cayman Islands as a boiler plate company and pay no tax what so ever. It should be abolished.

There are literally buildings full of essentially PO boxes where various ‘shell’ companies are registered.. Google do it, Facebook do it, I’d bet my last penny Elon Musk and a lot of politicians do it aswell.

Reeves and Starmer are going to pay the price for being so elusive about their budgetary plans pre-election.  They were so far ahead in the polls they could have been a bit more up front about their belief in the need to better balance the books (as they put it).  Instead, they are increasingly looking like they are manufacturing a crisis and their remedies are going to annoy more people than they need to.

This is what the US does, pretty much.

The Philippines too.

No, this is not a good tax system.

If the govt can only think of using the tax system to manage the economy then they are bankrupt of ideas.

Rubish there’s plenty of money it just needs a fundamental redistribution of wealth. have you not noticed that the poor have been disposesed while the rich prosper and the services people use are run down so that private enterprise can make profits.

Yes.

Looking one step beyond the money, what does this mean and how does it fix things? Genuine question for the economic minds here.

Is the idea that less spending on luxuries by “the rich” mean the labour requirement to serve that reduces, forcing people into other roles?

Should we be aiming to collapse demand for people servicing MTB suspension at £120 a go, so the techs are pushed to work in things like green energy?

@IHN

And the top one percent of earners already pay 30% of the total income tax revenue, so one has to be careful when saying “the rich’ don’t pay ‘enough”.

The gist of your link seems to be that plenty of very wealthy people pay disproportionately low rates of tax.

@kerley, you seem to be delighting in the likelihood of getting the Tories back in 5 years time, and denigrating people who voted Labour. I’ll just point out that the only real choice we had was Tory or Labour, and of those two, however disappointed you might be today, we got the least bad. Do you actually have any constructive suggestions?

Rejoin EU.

3p/litre tax hike on fuel per year throughout this Parliament while a full road pricing strategy is worked through.

Plus the thing about non-dom and I’d probably also go after the likes of Starbucks, Amazon etc.

There we go, I’ve fixed everything. What do I win?

UK Government spending is now about £1tn annually. £22bn is 2.2% of that. Any spending has to be balanced out and MMT does not fully account for this. What kind of an economy do we want? Currently, we have one where wealth is spread quite un-evenly (demographically and geographically). Highly mobile (for capital and labour) and based on trade (rather than production, for example).

To re-distribute wealth more evenly would (inherently) mean taking money away from one part of the economy and putting it elsewhere. There are pros and cons to each approach.

‘The rich’ are much more likely to save or buy imported luxury goods eg Mike Lynch’s Italian-built boat whereas the poor are much more likely to spend money on domestically produced goods. So, if you want to stimulate the economy you give more to the poor. Sadly, Starmer and Reeves seem set on the opposite.