UK Budget- The Axe Falls

[tibilicus]

http://news.bbc.co.uk/1/hi/politics/10371590.stm
The supposed "emergency budget" was revealed today and well, it was pretty much what everyone expected. Surprisingly however, despite what the naysayers said, it appears that the British public sector isn't going to be completely screwed to the wall, all in all, many people should be happy, obviously many aren't though.

Yesterday saw the surprising alliance of agreement between the Tax Payers Alliance and the TUC. Obviously they both have different motives for opposing the rise in VAT to 20%, the Tax Payers Alliance opposed it on the grounds they hate the word tax in general and the TUC because they hate everything proposed by Conservative governments, in general.

Perhaps the best thing in budget related news today however was watching Harriet Harmann and the Labour Party oppose the so called "reckless" budget. After 13 years of spending and spending beyond our means, Labour's solution to the problem? Spend some more! All this time not a single apology from a single Labour shadow cabinet member and still the party which used to be known for "taxing and spending" refuses to accept its new role as the party of "borrow and spend".

So, reactions, did anyone think it was going to be worse? Did anyone think it was going to be kinder?

[rory_20_uk]

Either Labour thinks heading for an IMF bailout is a badge of honour, or to admit everything they did was merely flashing the credit card would spell political suicide.

Best decry how theoretical jobs will be lost and gloss over how we got here.

~:smoking:

[Beskar]

Only way you could spend more to get out of it, is if you are spending it wisely.

After the 2nd World War, the Country in times of debt even set up the National Health Service, etc, and we got ourselves out of it.

However, I am still thinking this whole "budget" thing is a scam. Trying to use the recession to slash across the board on budgets, as if to say, it was in fact the Budget which was the problem and not the bankers.

It was the Bankers fault for the recession, and it was the bankers fault for us the taxpayer having to bail them out with money we didn't really have in the first place. However, I do agree that spending needs to be looked at, but I don't think we are nessecarily going the right way about it. Though a 20% VAT will make Furunculus wake up on the wrongside of the bed as it makes us hit the European levels.

[rory_20_uk]

The banks had to sell shares to the government. We're close to the point that selling them would make a profit. That leaves aside the money to insure the deposits which was further billions. Long term, the government could make a decent profit from being the world's biggest hedge fund.

The banks didn't create the structural deficit, nor the ballooned debt. And Brown's fiscal austerity is merely 400bn or so off...

~:smoking:

[Idaho]

Hmmm... Looks like those earning wages will be paying more, and those who profit from dividends, capital gains and company and corporate profits will be better off. Who'd have thought the Tories would do a thing like that?

And while the public sector is being slashed and people made redundant, housing benefit is slashed 10% too. Nice. So out of a job, and then out on the street. Good old Tories!

[Seamus Fermanagh]

Hmmm... Looks like those earning wages will be paying more, and those who profit from dividends, capital gains and company and corporate profits will be better off. Who'd have thought the Tories would do a thing like that?

And while the public sector is being slashed and people made redundant, housing benefit is slashed 10% too. Nice. So out of a job, and then out on the street. Good old Tories!

Have they got to the part about starving the kids and old people yet? It's never FUN being a conservative until you get to the juicy stuff.

[InsaneApache]

Have they got to the part about starving the kids and old people yet? It's never FUN being a conservative until you get to the juicy stuff.

They don't starve them. They eat them donchaknow!

It's a bit rich to blame the new government for slashing budgets and raising taxes. Then again some people live in a sort of parallel universe where all are winners and all the Tories want to do is enrich themselves and destroy the economy. Cos they can. :book:

[Beskar]

http://news.bbc.co.uk/1/hi/business/10376512.stm

List of it all by section.

Edit:

Just saw this little gem

Meanwhile corporation tax will be cut next year to 27%, and by 1% annually for the next three years, down to 24%.

So we pay more taxes, we lose benefits, and Corporations get free tax cuts? So much for everyone "feeling the pain", doesn't include you if your name is Steve Jobs, Lord Sugar, or a typical Conservative funder, etc.

[InsaneApache]

:laugh4: See. I knew one would be along in a minute. :laugh4:

[rory_20_uk]

Hmmm... Looks like those earning wages will be paying more, and those who profit from dividends, capital gains and company and corporate profits will be better off. Who'd have thought the Tories would do a thing like that?

And while the public sector is being slashed and people made redundant, housing benefit is slashed 10% too. Nice. So out of a job, and then out on the street. Good old Tories!

Amnesia kicking in already? Any idea why the country has no money? Another party? Likes to spend, pend, spend? Confuses "investment" with "waste"? Doling out houses and benefits make us a powerhouse of a country or a basket case?

Capital gains went up by 10%. It was reduced by Labour.

Almost entirely the Private sector makes money whilst the Public sector recycles it. So, we need more of the former and less of the latter.

~:smoking:

[Vladimir]

http://news.bbc.co.uk/1/hi/business/10376512.stm

List of it all by section.

Edit:

Just saw this little gem


So we pay more taxes, we lose benefits, and Corporations get free tax cuts? So much for everyone "feeling the pain", doesn't include you if your name is Steve Jobs, Lord Sugar, or a typical Conservative funder, etc.

You know corporate tax is a myth, right? It's the only tax you can pass onto someone else.

[Furunculus]

Good budget, I want it considered a point of fact by the thinking majority (obviously excludes the TUC) that spending more than forty percent of the nations wealth of government programs is immoral, as it destroys the long-term growth and competitiveness that will maintain our standard of living in a generations time.

My only worry is as to whether Defence can be considered a Whitehall department, and thus subject to the full 25% haircut, or whether only the MoD itself fits that definition in which case the likely Defence cuts will be closer to the RUSI prediction of 12-15 percent...........?

[Beskar]

Almost entirely the Private sector makes money whilst the Public sector recycles it. So, we need more of the former and less of the latter.

Mainly because we sold our profit making infrastructures or closed them down.

[Furunculus]

Mainly because we sold our profit making infrastructures or closed them down.

quick question, are we still in your fantasy land where socialism would work effectively had you been in charge?

[Beskar]

quick question, are we still in your fantasy land where socialism would work effectively had you been in charge?

Not really a fantasyland. My breed would socialism would work, and no, it is nothing like the CCCP. Also, you wouldn't have to pay income tax either.

[Idaho]

Ah yes - Tory governments. It's been so long I'd almost forgotten what they were like.

If you are rich, prepare to get richer. If you are poor - you're ******.

[Furunculus]

so much venom..................... but who cares?

[InsaneApache]

Not really a fantasyland. My breed would socialism would work, and no, it is nothing like the CCCP. Also, you wouldn't have to pay income tax either.

Please elaborate. I'm curious on how your socialism differs from what's been tried before and found wanting? :inquisitive:

[rory_20_uk]

Any analysis or constructive input? Or merely teh rather stale declamations which are not greatly based in reality.

~:smoking:

[Beskar]

Please elaborate. I'm curious on how your socialism differs from what's been tried before and found wanting? :inquisitive:


Any analysis or constructive input? Or merely teh rather stale declamations which are not greatly based in reality.

Incorrect Rory, it is firmly based on reality.

It is quite simple really, if the wealth generated is fed directly into the system, it would bypass all outgoings and middle men which clog up the private industry, and directly into the coffers. This would in turn fund all the projects and welfare required, without having to resort to "tax".

The world is structured with various different artifically constructed systems, as such, Tesco could be described as one system, who operates in various other systems. On the fuller picture, you have a tangled mess of various systems working in a complex arrangement far beyond the scope of the human imagination. However, there are two main elements present in these systems (which many like Marx identified) which is the "Creation of Wealth"/"Availability of Resources" inline with the "Users of Wealth"/"Resource Depletion". In a stereotypical capitalist system, you have the Corporations, all these various groups who create wealth for their own purpose. In reality, majority of this wealth feeds those within those systems, especially the dictator CEO's at the top. Any resources which come available is mainly from those within the system exporting the wealth out, or via taxes (by Governments or other entities). In these systems, you have all the middle men too, such as the Shareholders, and those earning far beyond their means with no work of their own. On the grander scale, all these different systems are not co-operating, but are infact competitive, they serve themselves opposed to serving humanity. This is a very inefficient, corrupt and pretty much goes against any logic or reason.

So what is the ultimate aim/goal? Without this, you cannot advance further. In short, I will simply quote this from Political Compass:

If economic globalisation is inevitable, it should primarily serve humanity rather than the interests of trans-national corporations.
Agree
Disagree

I believe that the economies purpose is to serve the interests of humanity, not the selfishness of the minority or a corporate elite. To be honest, I might as well as summarise it as this, you either pretty much agree with me, and you aim for that goal, or you disagree with me, then it is pretty pointless me and you having a discussion on economics unless you decide to change your mind as we will never agree.

Anyway, equipping yourself for this goal instead of that of selfishness, you would first try to develop an overarching system which can be managed, which you would then simplify to improve efficency.

Firstly you wouldn't bother with small buisnesses such as the corner shop, these simply are wealth-recyclers, not wealth generators. Infrastructure is that, these are not wealth generators by themselves, but these are nessecary to produce wealth (transport, electric, water, schools, etc). As for big wealth generators themselves, you bring these into the hands of the people, to be used to pay for the infrastructure, and to fund the otherthings such as healthcare which may be requested. As these wealth generators would automatically be funding these, this means that there doesn't need to be any income tax, since the wealth generators are what gives the wages in the first place so substracting it from that, doesn't make sense, as you could just extract it from the wealth generation itself.

Now you end up with the different systems, encompassed within a controllable singular environment, to produced the results we desire. Pretty easy to understand conceptually and logically and makes perfect sense.


[The finer details and structures of such systems, etc, are another subject within itself]

[rory_20_uk]

Bescar, I was referring to Idaho's comment. Apologies for causing ambiguity - I should have quoted.

I am a scientist by trade (sort of) and so I am happy to have anything challenged. I think that Small government capitalism is the best model, but if there are others that work better then that's fine.

I would say that competition is required to up the game of all as well as to find the best solutions (often there's more than one).

State-run institutions are not automatically better. They are often massively inefficient, slow to adapt and fail to innovate. Often they are also self serving (BBC which gets given money by the state still has a small army of people on more than £100,000 - why? There's no need for ruthless cut and thust as the money is already there.) Other examples: MoD purchases run years late as a matter of course, NHS spine cost over £12 billion - and doesn't work. Google grew from out of a shed and I can plot routes on my phone.

In drug research, things might work like a dream i the lab. It doesn't mean it'll work in a human though.

~:smoking:

[Beskar]

Bescar, I was referring to Idaho's comment. Apologies for causing ambiguity - I should have quoted.

My full apologises, it was mainly replying to a couple of comments in the thread. Don't take my reply personally as any attack or insult against you. Wasn't my intention.


I am a scientist by trade (sort of) and so I am happy to have anything challenged. I think that Small government capitalism is the best model, but if there are others that work better then that's fine.

I would say that competition is required to up the game of all as well as to find the best solutions (often there's more than one).

State-run institutions are not automatically better. They are often massively inefficient, slow to adapt and fail to innovate. Often they are also self serving (BBC which gets given money by the state still has a small army of people on more than £100,000 - why? There's no need for ruthless cut and thust as the money is already there.) Other examples: MoD purchases run years late as a matter of course, NHS spine cost over £12 billion - and doesn't work. Google grew from out of a shed and I can plot routes on my phone.

In drug research, things might work like a dream i the lab. It doesn't mean it'll work in a human though.

I don't agree with small state capitalism, as it just allows those with the means of production to run amok. I believe the economics, just like the politics, should be in the hands of the people for the benefit of humanity and not simply the shareholders or high-fliers.

I also do believe in healthly competition, especially in the inventor/research and development. I am a big supporter for technological advancement and progression. Many ways this could be done is rival public-owned institutions in the forms of different universities and research facilities. This would allow the sense of co-operation and competition to go side-by-side. I remember an interesting combination between the Health Research and companies such as BAE, and with this co-operation, there were some big leaps conducted, such as the rotatary-heart pump, etc. There are a lot of advantages that co-operation can bring which we can miss out on, simply because these are all different systems.

As for state-run = better, I agree, it isn't automatically better. But public-owned institutions are potentionally far-superior to fulfilling the task required of them (serving humanity), in comparison to private-owned institutions who simply have the goal of "making as much wealth for as little work as possible" and this usually for the private elite at the top. Also, I disagree with many laws and practises that have been or are currently in place. I am all for changing the public-sector as you call it, and making it better.

As for examples like google, I am all for public-support of such projects and advancements.

[Andres]

I don't agree with small state capitalism, as it just allows those with the means of production to run amok. I believe the economics, just like the politics, should be in the hands of the people for the benefit of humanity and not simply the shareholders or high-fliers.

Allthough that sounds very noble and good, I wonder what system you're going to implement to accomplish that. It's nice to use noble phrases as "for the benefit of humanity" and "in the hands of the people", but how exactly are you going to accomplish that?

Otherwise, what you are saying is just another empty slogan :shrug:


I also do believe in healthly competition, especially in the inventor/research and development. I am a big supporter for technological advancement and progression. Many ways this could be done is rival public-owned institutions in the forms of different universities and research facilities. This would allow the sense of co-operation and competition to go side-by-side. I remember an interesting combination between the Health Research and companies such as BAE, and with this co-operation, there were some big leaps conducted, such as the rotatary-heart pump, etc. There are a lot of advantages that co-operation can bring which we can miss out on, simply because these are all different systems.

How will you stimulate the competition? Or do you expect the competitors to compete for the sake of competing? People need motivation to work harder. Expecting people to work harder than others "for the benefit of humanity" is naive. Certainly if the guy saying it has his pockets full of tax money and lives a lazy life in a villa with swimming pool, a personal driver and doesn't do much more than doing a few passionate speeches about humanity every once in a year.


As for state-run = better, I agree, it isn't automatically better. But public-owned institutions are potentionally far-superior to fulfilling the task required of them (serving humanity), in comparison to private-owned institutions who simply have the goal of "making as much wealth for as little work as possible" and this usually for the private elite at the top. Also, I disagree with many laws and practises that have been or are currently in place. I am all for changing the public-sector as you call it, and making it better.

As for examples like google, I am all for public-support of such projects and advancements.


Again, "serving humanity" is vague. It sounds sloganesque. Most people won't work hard for "serving humanity". They want material stuff. We can regret that, but it's simply how most of us are :shrug:

So, you'll need something adapted to this reality to reach your ideal society. But I wouldn't throw away capitalism all together.

[Ja'chyra]

As I've siad before I'm a civil servant, so you know where my views come from.

I can accept a pay freeze even though most of the things you hear about our pay and pensions are total lies, we do get paid less than the going rate, in my case the industry equivalent is on double, our pension isn't gold plated, £12k for me at pensionable age and more than half way up the civil service food chain, and we're lazy buggers, I and my better half regularly work at the weekends and when on leave for no extra pay the same as industry do. What I can't accept is the lies printed about us that the government seems to agree with to the point where Foxy himself said he would sack 40,000 defence procurement staff even though there was only a total of 27,00 at the time and there is significantly less now.

So while I can accept a pay freeze as being in the best interests what it boils down to is the governement wants to replace us with contractors, how can that possibly cheaper? Answer - It isn't but it comes from a different budget so it will seem to be. Another thing is the contractors they replace us with will be the same contractors that receive the contracts that their own staff will be placing.

[rory_20_uk]

If the Public sector is so bad - leave for Industry. I did. Not for the pay, merely to do something that was interesting.

Some contractors do offer a very bad value for money. About a year ago another friend who is fast tracked in the DoH (Physics degree) was proudly telling me how they'd improved bidding for services int he NHS. Long story short the "innovation" was working out what something cost - which they'd not bothered to do for the preceding decade. Spine is another case in point. Contractors love government contracts as they're so lucrative. That's a failing of the Civil Service more than anything else. Doing things more efficiently would be the ideal - but whether that happens is another story.

Isral has a much smaller MoD and yet manager to be more efficient. I've no idea how they do this, but learning from them wouldn't be such a bad idea.

A friend of mine in the Bank of England has been offered a job with a 25% pay premium in the Private Sector, but is still unsure whether to take it due to the pension and security he currently enjoys. The pension is worth currently 20% of one's pay in terms of value.

~:smoking:

[Myrddraal]

Putting aside the rhetoric, both parties want to reduce the deficit, and I think we could all agree that it is for the benefit of the country to do so.

The real question is, will this budget achieve this? It's too easy to simply say cuts = lower deficit, it doesn't work like that and it never did and the conservatives were close to lying through their teeth (perhaps I should say, were being misleading) when they implied as much during the election campaign.

In the simplistic way in which I understand economics, to lower the deficit the government's income needs to be higher than it's expenditure. Simple as that.

Does this necessarily mean small government? No. Despite the Chancellors extensive use of the word necessary, this deficit is also being used as an excuse to reduce the size of government, a philosophy which the majority in this country do not support (hence the need for an excuse, with no mandate from the people).

A completely separate question is: will these enormous cuts work? They might do, but I'm not sure.

I really do only have a basic understanding of economics, but here's the situation as I understand it:

It is impossible to do reduce a government deficit without taking money out of the UK economy (unless the organisations to whom the government owes money are British, could anyone enlighten me on this?). The question is where to remove this money from, do you remove it from the income and wealth of the entire population, or do you remove it specifically from the public sector?



Lots of government cuts & No tax rises ↔↔↔↔↔↔↔
↔↔↔↔↔↔↔↔↔ No government cuts & Tax hikes


Vast amounts of unemployment is created in a very short space of time. Tax revenues plummet, and not only is the economy in ruins, but the deficit actually increases.

Money is removed from the economy in one focussed area: the public sector. Public sector jobs and services disappear.
In the short term the government succeeds in balancing the books, but the high burden on individuals and companies leads to a poorer population, and such a tactic will only last till the next general election.

Money is removed from the economy across the board. No individual sector is hit hard, but all suffer.




The extreme left (or should I say right) of this graph would clearly be a disaster. Have the conservative government got the balance right? At this point I'm lost, and the debate essentially becomes a debate between economists, but I can't say I'm overjoyed at the dangers present in this budget.

This is just my understanding of the situation, I don't pretend to be an authority on economics, and if I need putting straight in any way, fire away.

[gaelic cowboy]

Meh arguing over semantics the lot of ye, who care's about Marx or Maggie.

What 's being cut my friends how much is be added to petrol, drink or the fags, thats what is important to the man in street is his pension to be cut or VAT to increase not who spends more or if marx is wrong.

[Vladimir]

Myrddraal,

It looks like you're taking a private sector approach.

Cutting government budgets doesn't automatically mean layoffs like in the private sector. It is possible to cut the budget without affecting unemployment. However, while it is possible it is not probable.

[Furunculus]

Does this necessarily mean small government? No. Despite the Chancellors extensive use of the word necessary, this deficit is also being used as an excuse to reduce the size of government,

a philosophy which the majority in this country do not support (hence the need for an excuse, with no mandate from the people).

It is impossible to do reduce a government deficit without taking money out of the UK economy (unless the organisations to whom the government owes money are British, could anyone enlighten me on this?).

yes, because a level of governement spending over and above 40% of GDP has been shown to depress long term growth, which given our declining demographics is a sure way to make life miserable for future generations. having massive deficit spending also greatly increases the amount of debt interest a country has to pay, money that could be spent on services, an example of which is that by 2011 the british government will be spending nearly twice as much on repaying debt interest as it does on the defence budget.

i remain utterly and totally unconvinced that there is a majority in favour of keeping government spending as high as it is now, and if spending must be lowered then so must government ambitions.

government spending at best recycles money around the economy, and excessive spending has been shown to depress growth, so while the economy may take a short term growth hit while the private sector moves to occupy the space vacated by the public sector it will in the long term boost growth, and boost trade competitiveness by reducing the tax burden on british companies.

[Philippus Flavius Homovallumus]

I think it was overall a good budget, things like pensions will rise when they should (and they REALLY should) while other benefits, which have risen unrestricted will be cut and then capped. Capital Gains tax will rise, allowing more money to be clawed back from non-wage earners while the pain will be mitigated somewhat by cutting corporation tax.

We have to recognise that right now oil and banking make us money, and have done since Thatcher closed the massively inefficient and wasteful state-subsidised industries that wer, frankly, pathetic by modern standards. We must remember that the reason why we have no car manufacturers, motorbike manufacturers, or shipbuilders is because of state ineffiency, where innovation was quashed and these industries were used as a sort of feel-good form of subsidised working.

What no needs to happen is that industry and other forms of wealth generation are created and bedded in outside the South East, and the budget helps to encourage this as well.

[InsaneApache]

I'm drunk. :embarassed:

:balloon2:

[Furunculus]

interesting article on just how savage these cuts really are:

http://www.telegraph.co.uk/finance/comment/jeremy-warner/7850211/Budget-2010-get-a-sense-of-proportion-the-cuts-are-not-that-deep.html

not that savage really.

[rory_20_uk]

Although public sector job losses does decrease the tax revenue, seeing as the WHOLE salary was from taxes this is proportionally a saving.

~:smoking:

[Idaho]

Any analysis or constructive input? Or merely teh rather stale declamations which are not greatly based in reality.

~:smoking:

This budget is an aggressive attack on working people's wealth, and an unshackling of wealthy people's wealth. This budget will create unemployment on one hand, and with the other hand remove benefits from those it has made unemployed.

There are more unemployed already, than there are jobs to do. This drives down wages. Reducing benefits drives down wages. Increasing unemployment drives down wages. Increasing VAT drives down wages.

All the while talk of 'scroungers' increases (front page of the Express yesterday). It's the 80s again. Implement policies that increase unemployment, then blame the unemployed.

[rory_20_uk]

This budget is an aggressive attack on working people's wealth, and an unshackling of wealthy people's wealth. This budget will create unemployment on one hand, and with the other hand remove benefits from those it has made unemployed.

There are more unemployed already, than there are jobs to do. This drives down wages. Reducing benefits drives down wages. Increasing unemployment drives down wages. Increasing VAT drives down wages.

All the while talk of 'scroungers' increases (front page of the Express yesterday). It's the 80s again. Implement policies that increase unemployment, then blame the unemployed.

Mass immigration for a decade of Eastern Europeans coming to the UK to work. Does the UK have full employment? It must do surely. People wouldn't be unemployed whilst there are jobs to do that we have to get in others to fill? Uh, yes there are. Why is this? A system where benefits is more attractive than working - yet others are prepared to immigrate to do it...

The unemployed don't have to sit there waiting the next government job to come along. They could set up enterprises themselves! Do something without the State being involved. Heresy I know.

As jobs are basically infinite (although many oddly not wanted, as I said earlier). Persons can create them by doing new things. Innovation? I know, another dirty word.

Driving up wages achieves one of two things:


Inflation (1970's Labour)
Massive Government Debt (2000's Labour)


I realise that you seem to think printing and handing out money to all at a rate that would make Mugabe blush is a good idea, but oddly enough this tends to destabilise... everything.

Humans are generally extremely resourceful. They can find activities to do if need be. Currently doing nothing just happens to be the better option. I'm not blaming, nor telling the unemployed what to do. I am just not prepared to subsidise their inactivity when many jobs are either going unfilled or to migrant workers.

~:smoking:

[Furunculus]

This budget is an aggressive attack on working people's wealth, and an unshackling of wealthy people's wealth. This budget will create unemployment on one hand, and with the other hand remove benefits from those it has made unemployed.

There are more unemployed already, than there are jobs to do. This drives down wages. Reducing benefits drives down wages. Increasing unemployment drives down wages. Increasing VAT drives down wages.

All the while talk of 'scroungers' increases (front page of the Express yesterday). It's the 80s again. Implement policies that increase unemployment, then blame the unemployed.

Why do you not get this?

The noughties is not affordable, and continueing to pretend that is is will lead to the UK spending 27% of tax income on debt interest repayments by 2040, due to a national debt that is 400% of GDP!

This will not just be because of deficit spending, it will be because a high tax economy with a declining demographics in a world of aspiring BRIC nations is going to see its growth and competitiveness depressed by that high tax, which will limit our ability to let the deficit take care of itself.

What is more, continueing this high-spending madness will utterly ruin the quality of life for future generations when they are expected to cough up for the 20 million public sector pensions that are currently COMPLETELY unfunded. some might consider that immoral.......

[Idaho]

The unemployed don't have to sit there waiting the next government job to come along. They could set up enterprises themselves! Do something without the State being involved. Heresy I know.

As jobs are basically infinite (although many oddly not wanted, as I said earlier). Persons can create them by doing new things. Innovation? I know, another dirty word.

I realise that you seem to think printing and handing out money to all at a rate that would make Mugabe blush is a good idea, but oddly enough this tends to destabilise... everything.

Yes I have frequently promoted printing and handing out money. Also it's entirely feasable that 2 million people can set up successful innovative small businesses. You are really on a roll here :laugh4:

Meanwhile back in the real world...


Why do you not get this?

The noughties is not affordable, and continueing to pretend that is is will lead to the UK spending 27% of tax income on debt interest repayments by 2040, due to a national debt that is 400% of GDP!

This will not just be because of deficit spending, it will be because a high tax economy with a declining demographics in a world of aspiring BRIC nations is going to see its growth and competitiveness depressed by that high tax, which will limit our ability to let the deficit take care of itself.

What is more, continueing this high-spending madness will utterly ruin the quality of life for future generations when they are expected to cough up for the 20 million public sector pensions that are currently COMPLETELY unfunded. some might consider that immoral.......

I have never said that public spending should not be cut. You and rory breeze in with assumptions that are as lazy as your assertions. There are numerous, almost infinite other ways to reduce public spending and raise more money. This government chose a very specific method which will hit those on lower incomes hardest, whilst at the same time blaming them for their own situation. All the while, their corporate backers are looking at bumper profits and slashed tax bills. These 'wealth creators' as you like to coin, aren't motivated by employing people. If you gave the chance to make £10 more by sacking 10 people, they wouldn't even blink.

[rory_20_uk]

Yes I have frequently promoted printing and handing out money. Also it's entirely feasable that 2 million people can set up successful innovative small businesses. You are really on a roll here :laugh4:

Meanwhile back in the real world...



I have never said that public spending should not be cut. You and rory breeze in with assumptions that are as lazy as your assertions. There are numerous, almost infinite other ways to reduce public spending and raise more money. This government chose a very specific method which will hit those on lower incomes hardest, whilst at the same time blaming them for their own situation. All the while, their corporate backers are looking at bumper profits and slashed tax bills. These 'wealth creators' as you like to coin, aren't motivated by employing people. If you gave the chance to make £10 more by sacking 10 people, they wouldn't even blink.

Small business often employ other people. Suddenly the 2 million appears ridiculous.

Loads of other methods to cut spending and raise money... Odd you didn't mention any of them...

Businesses are not motivated by employing people. You're thinking of the Civil Service and other massively bloated industries that the state has owned in the past. But they do require people to be employed to, y'know, function.

Always better idea... just none that happen to work in reality. Socialism in a nutshell.

~:smoking:

[Idaho]

Small business often employ other people. Suddenly the 2 million appears ridiculous.

Loads of other methods to cut spending and raise money... Odd you didn't mention any of them...

Businesses are not motivated by employing people. You're thinking of the Civil Service and other massively bloated industries that the state has owned in the past. But they do require people to be employed to, y'know, function.

Always better idea... just none that happen to work in reality. Socialism in a nutshell.

~:smoking:

Sorry but if you really think that unemployment can be reversed by a few tax breaks for start ups and the odd grant, you're living in cloud cuckoo land.

[Vladimir]

Sorry but if you really think that unemployment can be reversed by a few tax breaks for start ups and the odd grant, you're living in cloud cuckoo land.

:laugh4:

If we use your statement as a metric than he's nutty as a hatter.

[Philippus Flavius Homovallumus]

Sorry but if you really think that unemployment can be reversed by a few tax breaks for start ups and the odd grant, you're living in cloud cuckoo land.

And if you think that the defecit can be cleared without brutal restructuring of the Public Sector you're considerably worse off.

Do you know what the best taxt rise really was? VAT, why you ask?

The answer is that it is unavoidable for both rich and poor, but it taxes spending rather than earnings, thus discouraging the rich from putting their money into things like capital, because no matter how they earn their money, when they spend it they will pay.

[Myrddraal]

The answer is that it is unavoidable for both rich and poor, but it taxes spending rather than earnings, thus discouraging the rich from putting their money into things like capital, because no matter how they earn their money, when they spend it they will pay.

Could you explain this to me? It doesn't seem to make much sense. How does a tax on spending (essentially a tax on consumption) discourage people from investing in capital? If VAT was to have any effect, wouldn't it do the opposite to what you say?


And if you think that the defecit can be cleared without brutal restructuring of the Public Sector you're considerably worse off.

Why brutal? Theoretically, the deficit can be cleared without any restructuring of the Public Sector, simply introduce phenomenally high taxation. I'm not claiming that this extreme would be any better than the other, but to pretend that 'brutal' restructuring of the Public Sector is necessary to clear the deficit is just that: pretence. Whether or not it is desirable is another matter.

Any why the word brutal? It's almost as if you are relishing the thought. like a child about to knock over a game of jenga.

[Philippus Flavius Homovallumus]

Could you explain this to me? It doesn't seem to make much sense. How does a tax on spending (essentially a tax on consumption) discourage people from investing in capital? If VAT was to have any effect, wouldn't it do the opposite to what you say?

People trying to get money out of capital rather than wages do so for tax purposes, raising VAT wipes some of that out. Also, a rise in VAt will probably drive down spending on luxuries, hopefully this will encourage people to spend less often and save to buy, rather than using credit.


Why brutal? Theoretically, the deficit can be cleared without any restructuring of the Public Sector, simply introduce phenomenally high taxation. I'm not claiming that this extreme would be any better than the other, but to pretend that 'brutal' restructuring of the Public Sector is necessary to clear the deficit is just that: pretence. Whether or not it is desirable is another matter.

Any why the word brutal? It's almost as if you are relishing the thought. like a child about to knock over a game of jenga.

The size of the State pretty much doubled under Labour, didn't it? The population didn't. Even assuming that the Conservatives under-funded the State, which I think is true in at least some cases, probably less in others, that expansion is untenable. So now the State needs to shrink, probably by 25% (which would still make it roughly 50% larger than it was 13 years ago.

How could anyone possibly think that, in a time when there is a massive hole in the public finances we can continue to use the State as a sink for those who might otherwise be employed.

As to Hyper taxation, it would never work because anyone with the money would leave the country and you'd be left just taxing poor people.

[Beskar]

As to Hyper taxation, it would never work because anyone with the money would leave the country and you'd be left just taxing poor people.

This ends up going into one of those "What if" situations where some one who didn't have an opportunity to create money because some one in the market is already there would then get the opportunity to make that money in their place.

When people leave, the wealth they would have recieved means they would have no longer recieve it, but other people do instead of them. Thus the money stays within the system. Therefore providing opportunities for others to recieve it.

[Philippus Flavius Homovallumus]

This ends up going into one of those "What if" situations where some one who didn't have an opportunity to create money because some one in the market is already there would then get the opportunity to make that money in their place.

When people leave, the wealth they would have recieved means they would have no longer recieve it, but other people do instead of them. Thus the money stays within the system. Therefore providing opportunities for others to recieve it.

Unless people, when they leave, take their money with them; further, hyper taxation always hits the poor as well as the rich, and as soon as you start making money you get even more hammered for it.

Even further, such a State (like the Labour one now being dismatled) has greater incentives not to work than to make money.

Ergo, tax revenue falls, so welfare dries up, so everyone ends up wretched. It has always happened in every instance, and the harder you push the worse it gets. Witness the difference between 1970's Britain and the Soviet Union; the latter took the doctrine to the extreme and the former was only rescued from complete ruin by Thatcher's own brutal form of politics, far more ruthless than Cameron and Clegg today.

[Beskar]

Unless people, when they leave, take their money with them; further, hyper taxation always hits the poor as well as the rich, and as soon as you start making money you get even more hammered for it.

Not necessarily, hyper taxation based on income only affects the money given to the individual. The money being made could hypothetically be used to hire more workers, lower the price of the product, be invested or be saved by the company itself. It doesn't have to be paid to that one person.

Though, I believe I said earlier that ideally, I would be in favour of no tax on income, under an ideal system.


Even further, such a State (like the Labour one now being dismatled) has greater incentives not to work than to make money.
Unfortunately, there are many people who cannot get jobs. I got a friend who keeps getting refused for being over qualified with a BA in History. Some of these interviews they were basically the only one even turning up in a smart dress. There is a real situation of people unable to get work and who want it, and can't get it, and they are expected to live off £50 per week. (I earn that in under 5 hours work).


Ergo, tax revenue falls, so welfare dries up, so everyone ends up wretched. It has always happened in every instance, and the harder you push the worse it gets. Witness the difference between 1970's Britain and the Soviet Union; the latter took the doctrine to the extreme and the former was only rescued from complete ruin by Thatcher's own brutal form of politics, far more ruthless than Cameron and Clegg today.

I haven't actually complained about the Budget for a reason, you know. My only main gripe was the reduction of Corporate tax. :tongue:

[Furunculus]

Any why the word brutal? It's almost as if you are relishing the thought. like a child about to knock over a game of jenga.
I am relishing the prospect, because I believe that titheing more than 40% of the wealth of a nation on an annual basis, and then borrowing still more, is immoral because it is both punitive to this generation, and will destroy the living standard of the next by reducing long term growth.

[rory_20_uk]

Not necessarily, hyper taxation based on income only affects the money given to the individual. The money being made could hypothetically be used to hire more workers, lower the price of the product, be invested or be saved by the company itself. It doesn't have to be paid to that one person.

Though, I believe I said earlier that ideally, I would be in favour of no tax on income, under an ideal system.


Unfortunately, there are many people who cannot get jobs. I got a friend who keeps getting refused for being over qualified with a BA in History. Some of these interviews they were basically the only one even turning up in a smart dress. There is a real situation of people unable to get work and who want it, and can't get it, and they are expected to live off £50 per week. (I earn that in under 5 hours work).

I haven't actually complained about the Budget for a reason, you know. My only main gripe was the reduction of Corporate tax. :tongue:

Although I agree that often the amounts those at the top of companies is obscene (especially when they get multiples of the average wage for leaving tee company they almost destroyed) good ones can add great value to the company. I don't like him particularly, but Steve Jobs has added billions to the value of the company and vast numbers of jobs and sales. He is probably worth the vast sums of money.

The end user gets £50 a week. Sadly, there is an army of form fillers etc to manage this so it costs the taxpayer a lot more to dole out the dole. Many long term unemployed also do other work and just not register it. What is the government going to do about it? They've no material posessions of their own, and prison is more expensive.

£50 isn't much of itself. Hell, my company charges clients £160 per hour for me (I've never bothered to work out the fraction I see - too depressing). Then add in council tax exemption, free prescriptions, free / subsidised housing, increased child benefit allowance and so on it becomes more substantial. Have enough children and as has been mentioned you loose when you work in absolute terms.

~:smoking:

[Idaho]

And if you think that the defecit can be cleared without brutal restructuring of the Public Sector you're considerably worse off.

Do you know what the best taxt rise really was? VAT, why you ask?

The answer is that it is unavoidable for both rich and poor, but it taxes spending rather than earnings, thus discouraging the rich from putting their money into things like capital, because no matter how they earn their money, when they spend it they will pay.

Then why is a VAT rise recognised by 99% of economists as being the most regressive way of increasing tax revenue?



Far be it from me to defend the last Labour government. But it strikes me that they weren't entirely responsible for this situation. Unless of course they managed to somehow create the exact same situation in Spain, Greece, Germany, France, etc, etc. I am deeply suspicious of the deliberate shift in the blame from the bankers to the previous government. Especially as the bankers got away with a £2bn levy in the budget. The banking equivalent of chump change.

[Beskar]

Although I agree that often the amounts those at the top of companies is obscene (especially when they get multiples of the average wage for leaving tee company they almost destroyed)

Agreed, it is quite disturbing.


£50 isn't much of itself. Hell, my company charges clients £160 per hour for me (I've never bothered to work out the fraction I see - too depressing). Then add in council tax exemption, free prescriptions, free / subsidised housing, increased child benefit allowance and so on it becomes more substantial. Have enough children and as has been mentioned you loose when you work in absolute terms.

Yeah, but those those with no children, having to stay at home with parents for example, because they simply cannot move out, and no matter how hard they try, cannot get a job, the whole situation is still quite dire and depressing. There should be more opportunities for people to get work. Unfortunately, I believe one of the schemes to do that was recently scrapped by the conservatives in this budget. :shrug: Another bad move, in my opinion.

[tibilicus]

Then why is a VAT rise recognised by 99% of economists as being the most regressive way of increasing tax revenue?



Far be it from me to defend the last Labour government. But it strikes me that they weren't entirely responsible for this situation. Unless of course they managed to somehow create the exact same situation in Spain, Greece, Germany, France, etc, etc. I am deeply suspicious of the deliberate shift in the blame from the bankers to the previous government. Especially as the bankers got away with a £2bn levy in the budget. The banking equivalent of chump change.

I thought the credit crunch (caused by the banks) and the structural deficit (caused by a government spending beyond its means) were two separate things? In this case, aren't the Tories attacking Labour for causing the structural deficit, not the credit crunch and recession in general?

[Beskar]

I thought the credit crunch (caused by the banks) and the structural deficit (caused by a government spending beyond its means) were two separate things? In this case, aren't the Tories attacking Labour for causing the structural deficit, not the credit crunch and recession in general?

The thing is, the structural deficit was managable before the Credit Crunch and then the Recession. While Labour were not making much fininical sense, they pretty much would have gotten away with it, if the Credit Crunch/Recession never occured.

This is not just in Britain, but in countries across the world. The recession cut hard and deep, and with the spiralling costs of lower taxes, and greater handouts, and reduction in the economy, it pushed a lot of countries over the edge, where they were previously comfortable.

This is even more complicated by the fact those that caused the mess in the first place, recieved handouts, and are now causing more of a mess themselves. Hedge Funders who set-up the dodgy American loans, for them to intentionally fail, are trying to make countries collaspe economically, in order for more wealth for themselves. It is highly immoral, and should be franky illegal, to the point of an act of war.

[Slyspy]

Frankly I regard increasing VAT as increasing tax on the poor (a class, and it is a class, that I'm not too far from being). They (we?) can least afford the extra cost. If you think that VAT only applies to luxuries then think again. This is unfortunate, and inevitable given the current coalition government. That said, I'm also convinced that a Labour government would have done no better for what you might call the working class.

Money has talked and those who truly caused the current crisis avoid the fall. It has not always been thus, but this time the poorer sections of society are taking the punishment alone.

[rory_20_uk]

So, Europe with Socialist governments are in problems (not all Labour, just very similar). Canada is doing rather well. The last decade they've been insurplus. They didn't borrow for the current spend.

Lack of regulation of banks. Yes, I agree. Thanks Gordon for splitting up oversight which didn't work.

~:smoking:

[Beskar]

So, Europe with Socialist governments are in problems (not all Labour, just very similar). Canada is doing rather well. The last decade they've been insurplus. They didn't borrow for the current spend.

Lack of regulation of banks. Yes, I agree. Thanks Gordon for splitting up oversight which didn't work.

America is in trouble too.

Also, Norway isn't in Trouble as well as Canada and they are both European-styled socialist governments. Mainly because of the vast amounts of Oil/Natural Resources though.

[Philippus Flavius Homovallumus]

Not necessarily, hyper taxation based on income only affects the money given to the individual. The money being made could hypothetically be used to hire more workers, lower the price of the product, be invested or be saved by the company itself. It doesn't have to be paid to that one person.

You have to pay someone who runs a company lots of money (or significantly more than their workers) because they need to be able to hire personal staff as well as workers for their company. A large sector of our economy is focused on providing various services, people need money to use those services.

Also, entrapeneurs use their own money to A: Create new companies, and B: lend money to others to start new companies. My Uncle did such a thing a few years ago, he now employs several hundred people in several counties, and in various parts of the UK.


Unfortunately, there are many people who cannot get jobs. I got a friend who keeps getting refused for being over qualified with a BA in History. Some of these interviews they were basically the only one even turning up in a smart dress. There is a real situation of people unable to get work and who want it, and can't get it, and they are expected to live off £50 per week. (I earn that in under 5 hours work).

He should move, there are plenty of jobs about for those with the sheer bloody-mindedness to get them.


I haven't actually complained about the Budget for a reason, you know. My only main gripe was the reduction of Corporate tax. :tongue:

Corporate Tax is a tax on business, and hence commerce. It's more than made up for by the 10% rise on Capital Gains.


Agreed, it is quite disturbing.

Yeah, but those those with no children, having to stay at home with parents for example, because they simply cannot move out, and no matter how hard they try, cannot get a job, the whole situation is still quite dire and depressing. There should be more opportunities for people to get work. Unfortunately, I believe one of the schemes to do that was recently scrapped by the conservatives in this budget. :shrug: Another bad move, in my opinion.

There are, just not where you are. You have to move to another part of the country in that case.


Frankly I regard increasing VAT as increasing tax on the poor (a class, and it is a class, that I'm not too far from being). They (we?) can least afford the extra cost. If you think that VAT only applies to luxuries then think again. This is unfortunate, and inevitable given the current coalition government. That said, I'm also convinced that a Labour government would have done no better for what you might call the working class.

Money has talked and those who truly caused the current crisis avoid the fall. It has not always been thus, but this time the poorer sections of society are taking the punishment alone.

The rise in VAT has funded tax cuts and child tax credits. VAT is not just a tax on luxuries, but it doesn't include essentials, like food. Raising VAT hits everyone equally, the charge that it is not "progressive" merely means that it does not punish the rich more than the poor.

I am not a wealthy man, but I am glad the taxes have been raised, because otherwise I know I will die a poor and wretched man, just like everyone else in my blighted nation.

[Beskar]

He should move, there are plenty of jobs about for those with the sheer bloody-mindedness to get them.

How would they move? They have no money due to be debt due to University, they have no way to pay for rent, food or anything in order to make this move. Even then, most jobs do not even pay in advance, unless they are specialised, so they would have to some how try to survive for at least a month on absolutely nothing.

There is no practical way. :shrug:


I am in a job, so I am happy as larry. Not everyone else is so lucky.

[Idaho]

He should move, there are plenty of jobs about for those with the sheer bloody-mindedness to get them.

Corporate Tax is a tax on business, and hence commerce. It's more than made up for by the 10% rise on Capital Gains.

So you believe that there are more job vacancies than there are unemployed? Despite all statistics to the contrary?

10% rise in capital gains - but an increase to £5m of the tax free threashold? Sounds like rich people with a good accountant will be entirely unaffected.

[Philippus Flavius Homovallumus]

How would they move? They have no money due to be debt due to University, they have no way to pay for rent, food or anything in order to make this move. Even then, most jobs do not even pay in advance, unless they are specialised, so they would have to some how try to survive for at least a month on absolutely nothing.

There is no practical way. :shrug:


I am in a job, so I am happy as larry. Not everyone else is so lucky.

Well, getting a job is hard, but when you're somewhere where people use your degree as an excuse to turn you down you're totally screwed. So you have to move to find a job, because a job will never come to you.

In your friend's case he has to scrounge/beg/borrow (not steal) £750-1,000 in order to set himself up once he has a job, and he needs train fares to commute to where the jobs are in the interim, so perhaps £1500 over all. In my case I had a little money left over after my second degree, and my parents helped.

Your student depts don't exist from a budgeting point of view until you are working any way, so you ignore them.

In my case I was lucky and well qualified, but no one down here is refused a job for having a degree, so your friend is clearly in the wrong place.

[Beskar]

In my case I was lucky and well qualified, but no one down here is refused a job for having a degree, so your friend is clearly in the wrong place.

There are the normal bank debts, since the Student loan doesn't even cover accomendation + Food bills, etc. I was working part-time, so I was able to get through without going into other debt, but other people did. I remember them doing so during my first year and thinking "What the heck?"

[rory_20_uk]

Doing a degree used not to be required by all. Now since they've become so devalued, it's almost obligatory - else one runs the risk of being the only candidate without one even if it's of limited value and caused a large amount of debt. Of course, being erudite enough to explain this to potential employers would certainly help.

So, you worked and others didn't. Students are over 18 - i.e. adults, responsible for their own lives and decisions. They can marry, vote and are doing a degree. I'd hope that they'd also be able to keep a budget or is this too advanced for degree level?

~:smoking:

[Philippus Flavius Homovallumus]

There are the normal bank debts, since the Student loan doesn't even cover accomendation + Food bills, etc. I was working part-time, so I was able to get through without going into other debt, but other people did. I remember them doing so during my first year and thinking "What the heck?"

Work more drink less, people who go heinously overdrawn get no sympathy from me, as someone who did an MA entirely off his own back, and is saving to start a PhD.

Life is hard, but letting yourself get into dept in the first place just makes it harder.

[Furunculus]

this deficit is also being used as an excuse to reduce the size of government, a philosophy which the majority in this country do not support (hence the need for an excuse, with no mandate from the people).


nope......................... still seeing nothing that would support the contention that people do not believe government is bloated and are happy with it the size it is:

http://www.telegraph.co.uk/news/newstopics/politics/7856191/Lib-Dems-flounder-as-poll-shows-boost-for-George-Osborne.html

[Beskar]

Work more drink less, people who go heinously overdrawn get no sympathy from me, as someone who did an MA entirely off his own back, and is saving to start a PhD.

Life is hard, but letting yourself get into dept in the first place just makes it harder.

Did the same myself. My poor bank account. :cry:

[Slyspy]

Of course not all unis and areas are equal. There will not be enough seasonal jobs available to our bloated uni population. However, I fear this may be a tangent from the purpose of this thread.

[Furunculus]

took me three years to pay off my MSc.

[Philippus Flavius Homovallumus]

took me three years to pay off my MSc.

I was fortunate enough just to make myself poor doing my MA, but I can't even find a way to get into dept for my PhD. There is litterally no facility to offset the cost, even of fees, while you are studying, and all this while undergraduates urinate their grants and loans up walls every day of the week!

I'm really quite frustrated over that.

On topic, reform of the university system not only needs to prevent it haemoraging money, it also needs to account for the spirralling cost of PG degrees.

[Seamus Fermanagh]

Choices, choices.....

VAT taxes tax the consumer/user of a particular good or service.
Advantages: relatively "invisible" as prices are usually listed VAT-inclusive, generates income across the economic spectrum on an equitable basis.
Disadvantages: can be viewed as regressive in character as since the funds that MUST be expended for basic subsistence -- and thereby taxed -- represent a higher proportion of the available resources of less wealthy persons.
Thoughts: Prima Facie, that suggests that increasing the VAT percentage will create a reduction in the demand for goods and services, notably for those goods/services which are not necessities. With demand dropping and supply remaining constant, this suggests further that prices for some luxury goods/services would drop -- thereby hurting the income streams of those providers.

"Flat" Income Taxes: In this approach all income (usually above a set "floor" amount) is taxed at an equal percentage rate.
Advantages: Encourages wealth accumulation and efforts to improve income stream, taps into most of the economic spectrum.
Disadvantages: Any earner in income ranges just above the "floor" amount will be paying tax money that "cuts" into the ability to spend on goods and services to a greater extent than those at higher income brackets. This can be viewed as regressive. Doesn't tap into "old money" that is not defineable as income in some fashion.
Thoughts: This one has a better doability factor in many political/economic systems. The potential for growth encouragement can be preserved while regression can be minimized through carefully setting the "floor" amount. The old money issue remains a concern.

Wealth Tax: Involves the periodic recalculation of an individual's total wealth -- income, property, etc., the establishment of a "safe" wealth level not subject to taxation -- and then the taxation of the remainder using some scale. Scale choices could include some form of "progressive" scale, taking a higher and higher percentage above that "safe point," a flat percentage above that point, or complete confiscation of the "extra" wealth.
Advantages: Functions as a direct means of wealth transfer to level out economic differences within a society -- which never quite happens with the other systems.
Disadvantages: Runs a real risk of "wealth flight" and serious efforts at tax evasion. Can create a "numbing" of capital investment etc.
Thoughts: No society currently practices this as an ongoing means of revenue generation. Tends to be more of a temporary act during revolutionary change periods.

Obviously, other taxes and combinations exist, but these characterize the "major" options. Thoughts? Especially vis-a-vis the UK.

[Centurion1]

Thank god the cost of my university is covered. In return for giving everything to my country.

Good deal for me since I was planning on it anyway

[Furunculus]

Choices, choices.....

VAT taxes tax the consumer/user of a particular good or service.
Advantages: relatively "invisible" as prices are usually listed VAT-inclusive, generates income across the economic spectrum on an equitable basis.
Disadvantages: can be viewed as regressive in character as since the funds that MUST be expended for basic subsistence -- and thereby taxed -- represent a higher proportion of the available resources of less .
VAT in the UK reallt isn't that regressive, as many items such as food and children's clothes are zero rated.

http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm

[Philippus Flavius Homovallumus]

Wealth Tax: Involves the periodic recalculation of an individual's total wealth -- income, property, etc., the establishment of a "safe" wealth level not subject to taxation -- and then the taxation of the remainder using some scale. Scale choices could include some form of "progressive" scale, taking a higher and higher percentage above that "safe point," a flat percentage above that point, or complete confiscation of the "extra" wealth.
Advantages: Functions as a direct means of wealth transfer to level out economic differences within a society -- which never quite happens with the other systems.
Disadvantages: Runs a real risk of "wealth flight" and serious efforts at tax evasion. Can create a "numbing" of capital investment etc.
Thoughts: No society currently practices this as an ongoing means of revenue generation. Tends to be more of a temporary act during revolutionary change periods.

Obviously, other taxes and combinations exist, but these characterize the "major" options. Thoughts? Especially vis-a-vis the UK.

Actually, most of Europe practices this, using a sliding scale where greater wealth is taxed at a greater rate.

[Myrddraal]

In a sense, inheritance tax is some form of wealth tax, which strikes when your wealth is to be passed on.

Personally, I think that wealth taxes are terribly unfair compared to taxes on income, since they could result in people paying to the government more than they earn. People who live in an area in which house prices have risen dramatically would be taxed on their wealth, which they may not be able to afford resulting in them having to sell up. In comparison to income taxes this seems horribly unfair to me.

[Beskar]

In a sense, inheritance tax is some form of wealth tax, which strikes when your wealth is to be passed on.

Personally, I think that wealth taxes are terribly unfair compared to taxes on income, since they could result in people paying to the government more than they earn. People who live in an area in which house prices have risen dramatically would be taxed on their wealth, which they may not be able to afford resulting in them having to sell up. In comparison to income taxes this seems horribly unfair to me.

Not really, as inheritance tax only affects the top 5% or so of the country.



edit: Also good news PVC, that friend has now got a job (after 8 months or so) on the employment scheme which will no longer exist because of the new budget.

[drone]

Not really, as inheritance tax only affects the top 5% or so of the country.
I think you would be surprised. A lot of family farms get lost from inheritence tax, when property values nearby go up. The appraised value of the land pushes them over the estate tax limit, even if the family is just getting by as is. They are left with no choice but to sell the land to developers to pay the tax.

[Philippus Flavius Homovallumus]

Inherritence tax is an evil thing, all those left-leaners should remember that it was first devised by Kings to gather as much wealth and power to the throne as possible, modern incarnations do the same; just to the "state".

Inherritence is not an economic activity, it should be a purely family matter which the state shouls not intrude upon.

[Furunculus]

especially given that most people who get hit by inheritence tax now are being taxed on money that has already been taxed.

[Seamus Fermanagh]

especially given that most people who get hit by inheritence tax now are being taxed on money that has already been taxed.

I believe that the classic counter to that is that:

You, not your "heirs" have a personal ownership/have earned those monies and been taxed on same. The state is taxing the "income" the inheritance represents to your heirs.

Others go further, arguing that the accumulation of wealth across multiple generations is directly counterproductive to a healthy society in that it leads to an entrenched elite who can be expected to pursue their own advantage at the expense of those less privileged. This sub-set believes that, upon death, all wealth (or at least most of it) should escheat to the state. The would-have-been heirs will still retain some advantages (likely had better schooling, healthcare when under their parent's care etc.) but will have to "make their own way" as does everyone else -- thereby avoiding the creation of a permanent elite based on wealth.


I more or less loathe this form of taxation myself.

[Furunculus]

I believe that the classic counter to that is that:

You, not your "heirs" have a personal ownership/have earned those monies and been taxed on same. The state is taxing the "income" the inheritance represents to your heirs.

Others go further, arguing that the accumulation of wealth across multiple generations is directly counterproductive to a healthy society in that it leads to an entrenched elite who can be expected to pursue their own advantage at the expense of those less privileged. This sub-set believes that, upon death, all wealth (or at least most of it) should escheat to the state. The would-have-been heirs will still retain some advantages (likely had better schooling, healthcare when under their parent's care etc.) but will have to "make their own way" as does everyone else -- thereby avoiding the creation of a permanent elite based on wealth.


I more or less loathe this form of taxation myself.

i don't have any truck with either of those arguments.

the money has already been taxed, and i reject any notion that what i have is an impediement to someone else experiencing a harmonious society. people who worry too much about what other people have, and whose solution to this angst is to find a mechanism to remove it from them, are deeply flawed individuals who would make everyones life better if spent their energy enjoying their own instead.

i too loath this on principle, and i don't come from a wealthy family, or expect to see any sizable inheritence.

[drone]

The best known way of redistributing inherited wealth is to wait a few generations. If a family's wealth can survive 3 or 4 generational transitions, they are doing something right and shouldn't be punished. ~;)

[Myrddraal]

You misunderstand me Beskar, the two points were completely separate. I wan't trying to imply that a lot of people are affected by inheritance tax.

My first point was that inheritance tax is some form of wealth tax. I'm addressing people saying "we don't really do wealth tax in the UK". Of course there's also council tax.

The second point was about wealth taxes in general, and how I find them to be unfair compared to income or consumption based taxes.

[Myrddraal]

the money has already been taxed

All money has been taxed at some point. The money you pay income tax on has already been taxed in the form of corporation tax, and VAT before that, and income tax before that etc etc. Money is often taxed when it changes hands, so the idea that 'the money has already been taxed' isn't very meaningful.

[Slyspy]

The multiple tax problem is one of the criticisms levelled at VAT. Especially for pensioners who were taxed on their income, are taxed on their pension and are continually taxed on their spending.

[gaelic cowboy]

I think you would be surprised. A lot of family farms get lost from inheritence tax, when property values nearby go up. The appraised value of the land pushes them over the estate tax limit, even if the family is just getting by as is. They are left with no choice but to sell the land to developers to pay the tax.

Thats not true a farm of land in US will be exempt up to 2million dollars, with an average price per acre of 1000 dollars thats 2000 acre. If we consider machinery, sheds an the family house as included you could still end up with a 1000 acres, thats a fair size farm thats is exempt from tax even for America.

And at the minute I believe the rate is being changed and could go as high as 5 million but don't quote me on that.

Far as I can see the Death Tax is a myth expounded by the very rich to cod ordinary people into thinking they might lose the farm.

[Philippus Flavius Homovallumus]

Thats not true a farm of land in US will be exempt up to 2million dollars, with an average price per acre of 1000 dollars thats 2000 acre. If we consider machinery, sheds an the family house as included you could still end up with a 1000 acres, thats a fair size farm thats is exempt from tax even for America.

And at the minute I believe the rate is being changed and could go as high as 5 million but don't quote me on that.

Far as I can see the Death Tax is a myth expounded by the very rich to cod ordinary people into thinking they might lose the farm.

Still happens in the UK though, so the principle is bad. In my view, if a tax needs multiple exemptions to work you just need a new kind of tax.

[Seamus Fermanagh]

Thats not true a farm of land in US will be exempt up to 2million dollars, with an average price per acre of 1000 dollars thats 2000 acre. If we consider machinery, sheds an the family house as included you could still end up with a 1000 acres, thats a fair size farm thats is exempt from tax even for America.

And at the minute I believe the rate is being changed and could go as high as 5 million but don't quote me on that.

Far as I can see the Death Tax is a myth expounded by the very rich to cod ordinary people into thinking they might lose the farm.

For the most part, the only land you can purchase at $1k/acre is undeveloped land. Land that has been developed/farmed is much more expensive. A single large combine can cost $150k or more by itself. The problem Drone points to is still very real, despite the laws attempting to minimize the loss of family farms. The key issue isn't that the inheritance tax forces the sale of the farm directly, but that farmers rarely have the liquidity needed to handle the payment of the tax without sale of land or heavy equipment. Further, to sell part but not all of the property requires county permission to "break up the lot" etc. The answer is life insurance in an amount sufficient to offset the projected inheritance tax -- but most people don't have the life insurance they need, farmers included.

[Beskar]

But Farms can be turned into Family firms, can't they?

So hypothetically, they can be exempt as they are a buisness which just gets passed down the family.

[gaelic cowboy]

I have done a bit more checking an that 1000 mark is prob including undeveloped and developed as an average so yes prob closer to 3000 average per acre. According to your own USDA my earlier assertion using two million is incorrect and it's actually 3.5 million dollars exempt.

Sorry for the mistake gentlemen

However farm size in America as elsewhere is being squeezed into the small niche end or the large scale factory style farm this tends to skew an average size family farm to the smaller end in a list. The real average size of a working farm and thats not including the smaller less productive farms is prob round 2000 to 2500 acres, not exactly small is it.

Land prices range naturally so we could be talking 4000-4500 an acre in Iowa while in Virginia it is quite similar prob due to greater potential for urban development.

The average income is around 70,000 to 80000 dollars but that is including the smaller farms I don't have a break down on that one, passing on a farm of that size will never reach the limit in a 100 years


A combine would not be valued at a factory price in an inheritance situation cos it will have depreciated massively, and anyway it would be a business asset and likely come under different rules.

The real people who lose out here are very large scale factory style farms that are run more like a wall street company than old Granpa Joe's cattle ranch and even still thats a small amount of farms.

Trust me the estate tax is a non issue but it makes good copy on telly especially in the major farming states. This really only became an issue because of the property boom, land went for silly money but that as we all know is gone now.

[gaelic cowboy]

But Farms can be turned into Family firms, can't they?

So hypothetically, they can be exempt as they are a buisness which just gets passed down the family.

The machinery is counted as an business asset in UK but the land is the farm plus the shed and maybe family house too for UK.

Thats cos the farmer could use the machinery to earn off farm income ie bale hay or silage for the nearby farms. As a result machinery is counted as a business asset which is a sensible way to do it really. If he does not earn off farm income via contracting he can still use the machinery to mitigate his tax through investment and depreciation of said equipment etc etc.

[Beskar]

Conservatives cut Bobbies on the Beat
http://news.bbc.co.uk/1/hi/uk/10442823.stm


So much for that age old campaign of them always wanting more.

[Furunculus]

All money has been taxed at some point. The money you pay income tax on has already been taxed in the form of corporation tax, and VAT before that, and income tax before that etc etc. Money is often taxed when it changes hands, so the idea that 'the money has already been taxed' isn't very meaningful.

it is when it is my money, or my families money. there is nothing good about inheritence tax.

[Furunculus]

Conservatives cut Bobbies on the Beat
http://news.bbc.co.uk/1/hi/uk/10442823.stm


So much for that age old campaign of them always wanting more.
that's a clever political game for Sir Hugh Orde to be playing, no wait, how clever is it really, after all i saw through it thirty seconds............?

[rory_20_uk]

IN the UK, assets that are gifted to descendants 7 or more years before death are not liable for death duties. So, for those with a lot, it is easier to gift them to one's children. A market rate has to be paid for use - but this then helps give more money to one's descendants. As such, in general it is one of the easiest taxes to avoid.

~:smoking:

[Myrddraal]

it is when it is my money

Are you saying that if you owned a business, then your employees shouldn't have to pay income tax, because you're paying them with your money? Your families money != your money, just like your employers money != your money.


there is nothing good about inheritence tax.

I wouldn't agree that there is nothing good about inheritance tax, but there's enough wrong with it to persuade me it's a bad thing without having to make up extra reasons. The idea that it shouldn't be taxed because someone else has already paid tax on it is a bit... silly?

[edit]


A market rate has to be paid for use
I had heard that with property, there is some legal block to this. Even if you gift your house to your heirs seven years before your death, if you keep living in it your heirs still have to pay inheritance tax. Is that right?

[Philippus Flavius Homovallumus]

IN the UK, assets that are gifted to descendants 7 or more years before death are not liable for death duties. So, for those with a lot, it is easier to gift them to one's children. A market rate has to be paid for use - but this then helps give more money to one's descendants. As such, in general it is one of the easiest taxes to avoid.

~:smoking:

No help if you get hit by a bus the day after handing it over.

[Furunculus]

Are you saying that if you owned a business, then your employees shouldn't have to pay income tax, because you're paying them with your money? Your families money != your money, just like your employers money != your money.

I wouldn't agree that there is nothing good about inheritance tax, but there's enough wrong with it to persuade me it's a bad thing without having to make up extra reasons. The idea that it shouldn't be taxed because someone else has already paid tax on it is a bit... silly?

there is a difference between public and private sphere of influence that can be quite clearly be delineated by a legally registered company.


No help if you get hit by a bus the day after handing it over.

agreed, its a stupid fudge to get around the inequity of inheritance tax, which does nothing to avoid the reality that the fudge works very inefficiently and props up a method of tax that shouldn't be executed in the first place.

[rory_20_uk]

No help if you get hit by a bus the day after handing it over.

Not that common, is it?

Best not train to be a pilot - you might sudddenly go blind
Best not to be a truck driver - you might sudfdenly get insulin dependant diabetes...

Life has risks whateer you do.

~:smoking:

[Philippus Flavius Homovallumus]

Not that common, is it?

Best not train to be a pilot - you might sudddenly go blind
Best not to be a truck driver - you might sudfdenly get insulin dependant diabetes...

Life has risks whateer you do.

~:smoking:

That's not the point, inserting an exemption that requires you to survive for seven years so your children don't pay tax on your assetts is insane. It demonstrates that the tax is inherrently unjust.

[Beskar]

or the loophole is unjust.

[Seamus Fermanagh]

That's not the point, inserting an exemption that requires you to survive for seven years so your children don't pay tax on your assetts is insane. It demonstrates that the tax is inherrently unjust.

Here the "lookback" rule is designed to prevent fraud. People will transfer official ownership of their assets to their children in order to qualify for Medicaid (welfare health care) to defray the costs of long term care. The lookback rule prevents folks from being diagnosed as needing long term care and THEN transferring assets so that the government can pay for them. One of the many charming regulations that sprout up around any health program that is not "fee for service."

I am reasonably sure that the seven year rule was established for your inheritance tax for like reasons. The government would not want the terminally ill or those in obviously failing health to sign over their assets in their final hours of life so as to beat the taxman. To do so on your deathbed would be fraudulent, but difficult to punish. :laugh4: I'm reasonably sure The Church would not even classify such a sin as "mortal," and I suspect that your family would be more than willing to do a couple of novenas on your behalf.

[Philippus Flavius Homovallumus]

Here the "lookback" rule is designed to prevent fraud. People will transfer official ownership of their assets to their children in order to qualify for Medicaid (welfare health care) to defray the costs of long term care. The lookback rule prevents folks from being diagnosed as needing long term care and THEN transferring assets so that the government can pay for them. One of the many charming regulations that sprout up around any health program that is not "fee for service."

Well, if you guys insist on private health insurrence...


I am reasonably sure that the seven year rule was established for your inheritance tax for like reasons. The government would not want the terminally ill or those in obviously failing health to sign over their assets in their final hours of life so as to beat the taxman. To do so on your deathbed would be fraudulent, but difficult to punish. :laugh4: I'm reasonably sure The Church would not even classify such a sin as "mortal," and I suspect that your family would be more than willing to do a couple of novenas on your behalf.

I have no idea how the Church feels about inherritence tax, but historically in England it was considered right to do anything to prevent the King and his sherriff from getting their grubby mitts on your assetts, because the King would take as much as he could to increase his own power and the sherriff had very sticky fingers.

Inherritence tax is the way the state prevents individuals from amassing power and wealth, it discourages frugality and palnning for the future because you loose you wealth when you die.

[Beskar]

Inherritence tax is the way the state prevents individuals from amassing power and wealth, it discourages frugality and palnning for the future because you loose you wealth when you die.

I don't think Heaven(or Hell) will accept my direct debit card.

It was only in history where possessions were buried along with the dead occupier, because they believed these items followed them to the afterlife.

Written more seriously, the wealth accumulated and earned is from the person who received it in the first place. If they decide they want to pay it all before they die, it is up to them or not. When you die, your possessions don't come with you, they get passed onto others anyway and the "death tax" doesn't affect 90% of the population or so. So those who would need the wealth the most, are unaffected.


The lookback rule prevents folks from being diagnosed as needing long term care and THEN transferring assets so that the government can pay for them. One of the many charming regulations that sprout up around any health program that is not "fee for service."

Actually, that is wrong. More accurately: "One of the many charming regulations that sprout up around any means tested health program".

In the UK, since Health Care is essentially a 'free service', we don't have that regulation, as people are not means tested in the first place to qualify for such 'aids'. In other-words, the more complicated you make the system, the more complicated the regulation is.

[Seamus Fermanagh]

In the UK, since Health Care is essentially a 'free service', we don't have that regulation, as people are not means tested in the first place to qualify for such 'aids'. In other-words, the more complicated you make the system, the more complicated the regulation is.

Fair point. I've argued before that the USA's current healthcare system is starting to represent the worst of all systems in combination without truly exercising the advantages of any.

[Philippus Flavius Homovallumus]

I don't think Heaven(or Hell) will accept my direct debit card.

It was only in history where possessions were buried along with the dead occupier, because they believed these items followed them to the afterlife.

Written more seriously, the wealth accumulated and earned is from the person who received it in the first place. If they decide they want to pay it all before they die, it is up to them or not. When you die, your possessions don't come with you, they get passed onto others anyway and the "death tax" doesn't affect 90% of the population or so. So those who would need the wealth the most, are unaffected.

You completely missed my point, so let me be explicit. After the Norman Conquest William essentially used inherritence tax to alter the balance of magnate power in his favour.

In any case, I think you'll find that inherritence tax affects far more that 10% of the population, you can run foul of it with a big house and a classic car. Should you be forced to sell those just because the tax man wants his cut?

Inherritence tax takes no account of liquidity.

[rory_20_uk]

In any case, I think you'll find that inherritence tax affects far more that 10% of the population, you can run foul of it with a big house and a classic car. Should you be forced to sell those just because the tax man wants his cut?

Yes. They're not yours yet - you inherited it. You did nothing for it whatsoever besides being alive.

~:smoking:

[Beskar]

In any case, I think you'll find that inherritence tax affects far more that 10% of the population, you can run foul of it with a big house and a classic car. Should you be forced to sell those just because the tax man wants his cut?

Re-mortage the house, then use the re-mortage to pay the Taxman his cut. You don't have to sell anything. Either way, it wasn't your property in the first place, it was some one elses.

[Vladimir]

Re-mortage the house, then use the re-mortage to pay the Taxman his cut. You don't have to sell anything. Either way, it wasn't your property in the first place, it was some one elses.

That's the point! :wall:

[Philippus Flavius Homovallumus]

Re-mortage the house, then use the re-mortage to pay the Taxman his cut. You don't have to sell anything. Either way, it wasn't your property in the first place, it was some one elses.

So get into dept to pay the tax man? Idiotic, especially in the current climate.

You are quite correct it wasn't yours, but it was your family's, and you undertook no economic activity to obtain it; it was gifted to you. Morally, it's worse than taxing children for recieving Christmas presents, because at least there no bereavement is involved.

[Beskar]

So get into dept to pay the tax man? Idiotic, especially in the current climate.

You are quite correct it wasn't yours, but it was your family's, and you undertook no economic activity to obtain it; it was gifted to you. Morally, it's worse than taxing children for recieving Christmas presents, because at least there no bereavement is involved.

It wouldn't be "going into debt" since the mortage would be on the house you want. Even then, it depends on how much money is going to single claimants as this also affects the rate, and money going to charity isn't taxed at all.

[Philippus Flavius Homovallumus]

It wouldn't be "going into debt" since the mortage would be on the house you want. Even then, it depends on how much money is going to single claimants as this also affects the rate, and money going to charity isn't taxed at all.

Morgage is debt, per definition.

Let me make it simpler, when my Father dies, hopefully at least a few decades from now, I should be able to have his knives, rifles, his motorbike, and anything else he chooses to live me without having to pay the state the privilage of recieving his personnal possessions. If he chose me to give me the house my sister and I gre up in, I shouldn't have to pay for that either.

Inherritence is not an economic activity.

[rory_20_uk]

So then your family has more, including land.

A family has one child. They die and pass all holdings onto the one child. He got married and his wife is also a single child. Her family pass on their possessions to her. In the meantime, they bought a place to live.

They have a child. When they die, they pass on the 3 properties (which are rented out) to the child. If he marries a single child their family will soon have a massive portfolio of holdings which drift down the generations.

And so on, and so on.

~:smoking:

[Slyspy]

That may happen. So what?

[Myrddraal]

Morgage is debt, per definition.

If you took out a mortgage on a house you had inherited, you would be making pure profit. Even if you couldn't keep up the payments, the bank could only repossess the house you didn't own in the first place, and you'd be left with a profit of the mortgage money.

[Seamus Fermanagh]

If you took out a mortgage on a house you had inherited, you would be making pure profit. Even if you couldn't keep up the payments, the bank could only repossess the house you didn't own in the first place, and you'd be left with a profit of the mortgage money.

Only true if the amount of money lent (and never repaid) exceeds the value of the property OR the profits generated by investing those funds exceed the income taxation on the growth thereof.

[Philippus Flavius Homovallumus]

So then your family has more, including land.

A family has one child. They die and pass all holdings onto the one child. He got married and his wife is also a single child. Her family pass on their possessions to her. In the meantime, they bought a place to live.

They have a child. When they die, they pass on the 3 properties (which are rented out) to the child. If he marries a single child their family will soon have a massive portfolio of holdings which drift down the generations.

And so on, and so on.

~:smoking:

Yes and? People born into wealth are, if anything, less loathsome than those who make a living getting it out of others.

They'll only keep all that if they're not stupid and wasteful, which many inherritors are, that's how you get impoverished nobles.


If you took out a mortgage on a house you had inherited, you would be making pure profit. Even if you couldn't keep up the payments, the bank could only repossess the house you didn't own in the first place, and you'd be left with a profit of the mortgage money.

Only true if you consider the house an assett, assuming it's your ancestral home then taking out a loan to keep it puts your family in dept, and in risk of losing said Seat.

[Myrddraal]

Only true if you consider the house an assett, assuming it's your ancestral home then taking out a loan to keep it puts your family in dept, and in risk of losing said Seat.

In other words, if it belongs to your family, it belongs to you, so loosing someone else's possession is a personal loss if they're from the family. I'm inclined to agree, but I can also see that as soon as you remove the family possessions = my possessions, it all falls apart.

[Philippus Flavius Homovallumus]

In other words, if it belongs to your family, it belongs to you, so loosing someone else's possession is a personal loss if they're from the family. I'm inclined to agree, but I can also see that as soon as you remove the family possessions = my possessions, it all falls apart.

From a legaslistic standpoint I would say "family" has to be defined in terms of direct antecendents, decendants and direct kin (i.e. it should include your aunts and uncles.), yes - basically. My Father holds the dead to his house, but half my stuff is still their and my Mother lives with him. To suggest I will sudenlly have to pay tax for the ownership of a house I, for all practical purposes, can exercise full rights over (I can go there whenever I want, have my own key, etc.)

[Furunculus]

even with current cuts the UK will still be using a third of tax receipts to service debt-interest by 2040:

http://www.telegraph.co.uk/finance/comment/7870200/Servicing-our-debt-is-tough-now-but-its-only-going-to-get-tougher.html

think how many gender awareness officers could have been employed if we hadn't doubled the size of the national debt under labour and flown over the edge of the financial crisis wearing concrete boots?

[Myrddraal]

That article is full of the bias we have come to expect from the Torygraph. Let's just look at some of the fine examples of impartial journalism.

The article starts by comparing the UK deficit with other western states, then by comparing national debt with other western states, noting that whilst the UK debt is 80pc of GDP, the US debt is 100pc of GDP.
The article says this is due to "general fiscal irresponsibility" (presumably globally, or at least in western states) and the sub-prime meltdown.

The 13 years of labour in which government debt more than doubled are called "Gordon Brown's reign of fiscal terror"
The predicted 4 to 5 years in which government debt is set to double again is called "George Osborne's recent "austerity budget""

How does this statement match up to the accusation that the government debt is to be blamed on Gordon's mismanagement? How can they possibly say that it was the previous government, not the recession, when the next government's dramatic cut backs are predicted to have no effect? If anything, since we can blame the national debt solely on the government, surely the LibCons are even worse than labour, since under them debt is set to double in only four years compared to thirteen?

Note that I don't disagree with the need for cuts, but the endless witch hunting of anyone who isn't a conservative politician is tiresome.

[rory_20_uk]

I agree that the Telegraph is not the best place to look for unbiased reports.

I would say that managing to run a deficit during the boom years has meant that we are in the situation we are currently in. This is aprtly due to dear ol' Gordon single-handedly getting rid of boom and bust - until the Global crisis occurred. Yes, we were lumbered with someone who didn't notice how global things are only after it's wrecked our economy.

I do agree with the cuts. I also feel that many would not have been required if they'd never been employed in the first place. Yes, schools will suffer - do they need new IT systems? Are electronic whiteboards required, or rather decent teachers?

Private Sector has become more productive over the last 10 years.
Public sector has become less productive.

I didn't understand your last paragraph. Could you explain it?

~:smoking:

[Myrddraal]

The telegraph seems to me to implying that the government debt is to be blamed entirely on the previous government (or perhaps I am guilty of reading what I expect to see). How does this match up with their own explanation of the national debt in the US, in Spain and the predicted national debt in the years to come? The financial crisis is the single most important reason for the government debt. Even with a prefect government, I would hazard a guess that we would still be in monumental debt. I will not 'blame' the LibCon government if debt rises in the next two years, since we are in a recession, yet the telegraph seems obsessed with placing all our financial problems at Brown's doorstep, throwing in the sub-prime collapse almost as an afterthought. This is what bugs me.

I hope that's a little clearer.

It seems to me that the recovery of our GDP is far more important to our national debt than any spending decisions the government makes or doesn't make. I am under the impression that the tax revenue gained by relatively small increases in GDP will be comparable to savings made by significant cuts. The prediction that our national debt will double in four years seems to back up that impression.

[Furunculus]

That article is full of the bias we have come to expect from the Torygraph. Let's just look at some of the fine examples of impartial journalism.

The article starts by comparing the UK deficit with other western states, then by comparing national debt with other western states, noting that whilst the UK debt is 80pc of GDP, the US debt is 100pc of GDP.
The article says this is due to "general fiscal irresponsibility" (presumably globally, or at least in western states) and the sub-prime meltdown.

The 13 years of labour in which government debt more than doubled are called "Gordon Brown's reign of fiscal terror"
The predicted 4 to 5 years in which government debt is set to double again is called "George Osborne's recent "austerity budget""

How does this statement match up to the accusation that the government debt is to be blamed on Gordon's mismanagement? How can they possibly say that it was the previous government, not the recession, when the next government's dramatic cut backs are predicted to have no effect? If anything, since we can blame the national debt solely on the government, surely the LibCons are even worse than labour, since under them debt is set to double in only four years compared to thirteen?

Note that I don't disagree with the need for cuts, but the endless witch hunting of anyone who isn't a conservative politician is tiresome.

you have a failure of understanding.

there is a qualitative difference between a deficit and government debt, although the former leads to the latter.

gordon decided his magnificent tenure of the treasury had forever broken the economic cycle of boom and bust, he therefore continued in times of rising prosperity to increase government spending as a proportion of government spending and to borrow wildly on top of that. saving the surplus from summer to mend the roof in winter didn't matter to gordon because he had broken the economic cycle, he was that good!

as a result, even though osborne is starting to chop the deficit it does get around the accumulated government debt that has already built up, and will continue to increase until the deficit is gone, but in the mean time we still have to roll over debt that is coming due for which we do not have the money to repay, and we must do so at much less benign interest rates given the markets perception risk of a sovereign debt crisis.

the best that osborne can do is reduce the deficit as quickly as possible, and create a growth friendly business enviroment to permit a surplus from which debt can be paid down. and given our demographic problem he also needs to reduce the state sector (with its truly enormous pension liabilities) and reduce business unfriendly regulation because we need a minimum of 2.00% annual growth from here on in to maintain living standards at current levels (the eurozone by comparison will have an average of ~1.5% long-term so their standard of living will drop far more dramatically).

it is not GB's fault that the crisis happened.

it is his fault that:
> interest rates were too low for too long encouraging private debt accumulation
> that his tripartite system failed at its first crisis
> that britain didn't go into the crisis with a surplus
> that business regulation from brussels is ludicrous
> that the public sector employs 1m too many people
> that there collected pension liabilities are stupendous

there is plenty to blame GB for.

[Furunculus]

How does this match up with their own explanation of the national debt in the US, in Spain and the predicted national debt in the years to come?

Spain will pay with lower long term growth and watch its standard of living deteriorate as a result.

America is playing a dangerous game that depends on its reserve currency status allowing it to borrow at low rates even when everyone else is crippled.

[Myrddraal]

No no, I assure you I don't have a failure of understanding of the difference between deficit and debt. Quite to the contrary, you should re-read your own article, that states that despite the austerity budget, the debt is set to double in 4 to 5 years time.

EDIT: just to be absolutely clear, the article uses relative terms, such as 'double'. The debt is not 'doubling' due to the size of the existing debt.


the best that osborne can do is reduce the deficit as quickly as possible, and create a growth friendly business enviroment to permit a surplus from which debt can be paid down

What I am arguing is that the second is by far the more important of those two things.

[Furunculus]

EDIT: just to be absolutely clear, the article uses relative terms, such as 'double'. The debt is not 'doubling' due to the size of the existing debt.

What I am arguing is that the second is by far the more important of those two things.
the total debt is due to go from something around 68% of GDP to a total of somewhere north of 110%, but no this is not solely due to rising interest on debt servicing, it is however a problem compounded by previous debt insomuch as the public programs it was used to fund have now caused a debt overhang resulting from collapsed public revenue collection, and that overhang largely results from the previous two years of recession, and it is going to continue to be a problem because you cannot sensibly or legally just dump 1+ million people immediately back on the labour market.

i agree it is important, but not much more so than avoiding the BIS prediction of a public debt that eats up 15% of GDP (and therefore ~ 35% of gov't spending) on debt interest repayment by 2050.