emergency uk budget

Discussion in 'Politics' started by 123scotty, Jun 23, 2010.

  1. 123scotty

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    one thing i am confused about it this emergency budget. was all the money given to the banks not in the form of a loan. and as any bank will tell you loans have to be paid back with interest. so why will i be paying 20% vat and watching severe cuts in services. to pay for the money given to banks which they will pay back anyway. hmmmmmmm
     
  2. Jason

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    The money given to the banks was in the form of buying an asset - bank shares. At some future date when the banks are stronger it will be possible to sell these shares, perhaps even at a profit. But not right now.

    The banking costs came close to tipping the UK over the edge. They were truly the last straw for an already overstretched borrowing regime. And the key point is that they were only the last straw, not the underlying problem.

    The underlying problem can be expressed very simply. This tax year we expect to get in something like £540bn in tax. But government spending is around £700bn. Result massive shortfall, which we have to borrow. And we've now been doing something like this for years, and even on the best plan will take us 6 years before we stop borrowing more. And that's without unexpected problems, and before we actually pay a penny back.

    Up to a point we can tax more. But we would be daft to tax jobs (NI, Corporation). Income tax on the rich doesn't work (they just employ a better accountant) and income tax on the poor isn't fair. We are screwing the banks - if we screw any harder they will just go broke again and we will pay. VAT is the least bad option, but it is still bad.

    Most of the pain has to be on cutting expenditure.

    The budget is a great example of TINA economics - There Is No Alternative. And this is the brutal position. The Lib Dems, now they are in government, have had to sign up to TINA. Would Labour if they had been in power? Probably not. Their favoured solution was the Greek option - go broke, bind the UK and all EU countries to the EU forever as one big, broke, socialist paradise where everyone is equally poor and equally miserable.

    I am thrilled with this budget. Given the mess we are in I cannot see how it could be improved. It gives us hope. We've turned our backs on inevitable failure, inevitable poverty, inevitable misery, and embraced a financial policy that has a pretty good chance of working.
     
    #2 Jason, Jun 23, 2010
    Last edited: Jun 23, 2010
  3. dandelion

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    Thats a little disingenuous, thank you. The shortfall is now 160bn, but that is post recession. It was nothing like this before. The labour government was holding the budget deficit at roughly the same proportion of national wealth (which means it went up each year, because wealth went up) but this was not considered unreasonable until the disaster struck. National wealth having shrunk rather than grown for a couple of years, there is a shortfall, and future plans presumed a steady rise. We now have to retrench on several years worth of government growth to stabilise the situation. This is not a political issue: the situation would not now be materially different if labourt had lost the election 5 years ago.


    well I agree with you that taxing consumption (ie VAT) is better than taxing income, but this isnt really a situation for ideal courses of action but any available. I think it is a good thing that VAt has gone up and it will never be coming down again. That doesnt mean the government can afford to relinquish income taxes, it needs every penny it can get. Dont know what they think in the treasury: lots of huffing and puffing to shave 7bn off budgeets, and BP goes and slashes much the same amount out of revenues. One of the threads here criticised republicans that they love to slash taxes, but were never any good at balancing a budget. The alliance is leaning heavily on cutting expenditure to balance the budget rather than raising taxes. The budget has to be balanced.

    Hmm, last I heard they were making money hand over fist again. They never stopped making vast amounts of money on their ordinary transactions. It was just one particular adventure which generated even vaster losses. Having dealt with the poison which exceeded even their abilty to make stunning amountds of money, they actually have relatively few debts and are making just as much as ever. So there is plenty of scope for taxation. Be quite sure bank bonuses are back.

    . My guess is that labour would have had a budget with a similar effect next april, rather than backtrack on their budget this year already. Thats only 9 months later than this budget to start cutting and is close enough to not make any real difference. I imagine labour would have concentrated more on raising taxes and less on cuts. An autumn statement of what was in the wind, to calm financiers nerves. I agree with you though that it ought to be much easier for con/lib to introduce cuts than labour, especially if they had a very narrow majority.

    your natural bias is showing!

    I found it a bit of an anticlimax. I would judge it was soft on banks. Lets hope they are serious about effective regulatory reform, which is probably more important. This is really only a downpayment, long way to go yet.
     
  4. D_Andreas Sukov

    D_Andreas Sukov Account Disabled

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    What is the civil list? Why is it still £7.9 million? Isnt it just money for the Queen? Cant we just Kill em off, and get some money back and pay a few doctors?
     
  5. D_Relentless Original

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    Can anyone explain how this will affect pensions?my company want to finish everybody off who is 55 and over and take early retirement, surely this is gonna cost more in the long run. Also people who are 65+ are being told they have to finish work, i was under the impression you can continue to work too?
     
  6. Jason

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    Had we suffered another Labour government the credit rating agencies would already have moved against us and our budget would be set by the IMF/EU. The comments from the agencies (Fitch particularly) and from the Governor of the Bank of England leave surprisingly little room for doubt about this. The day Gordon Brown was confirmed as PM the rating agencies would have rated.

    With the IMF setting the budget we could reasonably expect VAT at 25% and cuts of 25% and upwards across the board, including the NHS. Basically we would have a skeleton state health system and a need for private provision of most health and education.

    In a perfect world people need to vote Labour and see just how bad it would be, then get in their time machine, go back and make a sensible vote.
     
  7. Jason

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    There are perfectly good arguments against the concept of monarchy, but this is not one of them. Rather it is the language of a rude and thoughtless silly little kid.
     
  8. dandelion

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    And a replacement president would be cheaper?
     
  9. dandelion

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    theres an unfortunate phrase. At a guess Id say that at age 55 people would qualify for a pension, so the company can shift them off its books onto that. As senior staff maybe they earn more than those aged 25, so they reckon to get some more cheaper 25 year olds?Might cost someone more, but not them. After 65 you can continue to work as much as you and your employer like, but they have the right to tell you to get lost.
     
  10. dandelion

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    There isnt much different about the financial situation now and 6 months ago. Maybe they dont like labour, but that just might be a political rather than financial statement. Had a labour government been returned with a majority of 50 or so the markets wouldnt have made a squeak.

    People did vote labour 13 years ago and financially speaking it turned out fine. Curiously it was their military and anti-libertarian policies which sank them. You still will not acknowledge that the problems of the british economy were caused by banks.
     
  11. Drifterwood

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    There are three parties responsible, the banks, the British Government for licensing and raking profits off the party and a large portion of the British people who happily went to the party.

    I didn't go to the party, but I now have the bill. It always looked reckless to me and a government that feeds recklessness should be shot. They were, so that is at least something.

    I do some work with the Public Sector. Some of them live in cloud cuckoo land, but that is their normality, so it is hard for them to see it. I hope they can understand that the party is well and truly over, but what worries me is that they will not address the problem of jobs before services. They will cut the services we pay for, before the jobs that are not justified.

    Did Labour create an extra 600,000 public sector jobs, when most in the private sector thought that they were mollycoddled before? Please don't patronise me with motherhood statements that everyone in the PS is a saint. They are not, many have been on a very cushy number convincing themselves that they are vital.

    The benefits system has to be brought into line and delivered to those in genuine need rather than for convenience. And please don't tell me that everyone on benefit is a saint, they are not.

    If these cuts are all implemented though, I fear that they will go too deep, however as a message to those who have been enjoying the unreality, it is probably fair.
     
    #11 Drifterwood, Jun 24, 2010
    Last edited: Jun 24, 2010
  12. D_Tully Tunnelrat

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    Given the vast hole that is the UK deficit the question is: do you kill off the recovery by appeasing the bond market, and reducing the deficit too far? Deflation is a nefarious and still possible outcome for not only the UK, but all industrialized counties, as long as Asia continues to support a full employment policy. At present China is set to overtake the US as the largest manufacturer in 2013-4 with $2T in production.

    As to when pensions will begin, if France is pushing back the retirement age to 62, (Illinois just upped it to 67), then most industrial countries will be pushing back retirement towards 70, which given life expectancies of 78-82 is appropriate and overdue.
     
  13. Drifterwood

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    Well, if you don't appease the bond market, you will have a big recession. Personally I would have realistic targets of what % of GDP the Public Sector can have. People need to understand the responsibility and not expect handouts as a right. We work to be able to afford Public Services and benefits, there has to be an acceptance that there is a limit to what can be afforded. I am afraid too many of us take things for granted.
     
  14. D_Tully Tunnelrat

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    I think we see eye to eye on the need for the public sector to stick to a sustainable budget. Taxes are hardly a morality play in which paying more buys absolution. If all governments had to set their public budget at say 20% of GDP, we'd see a very different set of economic priorities.

    As to the bond market, they wield too much power. It would have been far more efficient if many bonds in the UK and elsewhere in the "developed" world, were simply given a haircut, even if the public paid to offset some of the loss, rather than propping up the banks, who indeed have become river boat gamblers on one hand, while presiding over grannies pension on the other.

    We have not had deflation on a world wide scale since the Depression. It's a more pernicious evil than inflation. Just look at Japan. I would hate to see the UK, or any other country, in the same straights 20 years on.
     
  15. Drifterwood

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    20%, we'd be happy with 40% right now.

    I have to work, but I would love to chew this one over when I have the time.
     
  16. D_Tully Tunnelrat

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    I hear you. It's an interesting construct. If admin of a business can be run at less than 10%, what should gov. cost? Imagine having a fiscally accountable administration...
     
  17. dandelion

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    Im sure we would, but would this be better? In effect you are taking a position against wealth redistribution. The rich get richer and the poor, poorer. (at least relatively, but in such a scenario, absolutely). Is this acceptable? The final analysis in a democracy is what the bulk of the population, who you are taking money from, decide. In a non-democracy, its every man for himself. Expect crime rates and civil disobedience to rocket. All western societies have decided wealth redistribution is essential. The trend with passing years is for this to increase, and it is going to continue.
     
  18. 123scotty

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    the retirement age of 65 soon 66 and not so long after 67 is wrong. it should stay at 65. if you are fit enough or want to carry on working then so be it. but keeping an older workforce does no good. as it only stops younger people getting a start or promotion. and to make things worse the people making these decisions have a final salary pension to dream of. and get to retire at 60 do you think the civil service or mp's will have their retirement age put up.
     
  19. Jason

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    I agree that people voted Labour 13 years ago (no doubt about that!) and I agree that the growing realisation that they took Britain to war on a lie and have scary anti-libertarian policies are major causes of their recent election defeat.

    But "financially speaking it turned out fine". This is a wind up, right? Labour inherited a UK economy in the best shape it had been in for a very long time - probably since before the 1WW. They left an economy in the worst shape it has been in peace time ever, perhaps the worst state since the end of the Napoleonic wars. True there have been problems elsewhere, but most countries have done far, far better.

    The banks were one problem among many (see Drifterwood's post - no need for me to repeat). If the Conservatives had been in power I don't think we would have the overblown benefit system we now have, and I don't think we would have public sector costs so high. I also think there would have been changes to the ways banks were regulated - probably less regulation but better quality regulation. Yes the global financial storm would have hit, but we would have been in a better state to weather it.

    Much of the story around the ratings agencies and the election result is in the public domain if you hunt for it. All three postponed rating the UK until after the election result, and as it happened hung on until the coalition talks yielded a result. All three had indicated that a hung parliament would cause a down grade. We pulled off a good result by a miracle. I know after the event the world and his wife reckon a Lib-Con coalition was on the cards but this isn't my reading of events before the coalition was formed - and in my view the coalition is something of a miracle. What would they have done if Labour had won a working majority? Downgraded. Clegg and his team had the sense to see what the reality was, and the decency to do the right thing for Britain. I'm impressed - they have performed better than I would have expected.

    This budget contains lots and lots of pain. But it also offers hope - hope that we are going to remain solvent as a nation and the prosperous lifestyle we have continue. This is a wonderful budget.
     
  20. Jason

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    The two changes that are in place are the equalisation of the state pension age for women and men (at present scheduled for completion 2020) and increase in the state pension age for both - to 66, perhaps to be increased from this age, and possibly to be implemented as early as 2016. I don't think the details have been decided yet.

    The equalisation surely has to happen - it is very hard to find a justification for different retirement ages (and as women on average live longer than men we have a situation where the average man has 12 years of state pension and the average woman 23). I agree that putting up the state pension age will cause all sorts of problems.

    Part of the answer is that no-one should be reliant on a state pension. Right now it is £97.65 a week, which is pretty minimal. Absolutely everyone needs their own provision. And once you accept that you need your own provision you can start to decide when you want to retire. This is certainly the case with private pensions. The public sector pensions of civil servants are coming under scrutiny because they do seem very generous - probably those in the public sector will have to contribute more to their final salary pensions.

    I accept that there are some people who absolutely cannot afford to pay into a pension. But there are also a large group of people who say they can't but who smoke, drink, have foreign holidays, drive a swish car. For many it is a choice. And even a small private pension - say £5000pa - doubles the money that is given by a state pension alone.
     
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