Mini Budget aka Fiscal Statement

[jamesbrown]

Stamp duty stuff is bonkers and would be laughable if the consequences weren't so obvious and bad.

TBF, stamp duty is a highly inefficient tax because it rigs transaction volumes. However, eliminating or reducing stamp duty alone is... suboptimal. Ideally, you'd do it together with planning reform and council tax revaluations and/or adding extra categories, but they reach for the easy thing (stamp duty) without addressing the hard things.

[jamesbrown]

Several of the tax 'cuts' are IIRC not really cuts, but cancelling the planned increases which didn't yet take effect?

Only the planned CT increase. The NI rise is already in place and the rest are new/mooted reductions.

[DealorNoDeal]

The energy price cap will reduce inflation in the short-term but this, and the tax cuts, may cause inflation to persist for longer meaning higher interest rates for longer, possibly leading to a more drawn out recession.

If I was the Tories, I wouldn't count on things being too rosy by the time of the GE. The real tulip show may not really get going until next year.

[mattster]

TBF, stamp duty is a highly inefficient tax because it rigs transaction volumes. However, eliminating or reducing stamp duty alone is... suboptimal. Ideally, you'd do it together with planning reform and council tax revaluations and/or adding extra categories, but they reach for the easy thing (stamp duty) without addressing the hard things.

Agree that stamp duty is a tulipty tax, particularly in the way that it inhibits free movement, but they are not getting rid of it for that reason - they are simply trying to pump the housing market up again (and they'll probably succeed..).

[DealorNoDeal]

...they are simply trying to pump the housing market up again (and they'll probably succeed..).

Might depend on how high interest rates end up having to go to curb inflation and, if there is a recession, how bad/prolonged it is.

The markets are expecting the base rate to hit 3.75% by the end of the year.

[SueEllen]

Might depend on how high interest rates end up having to go to curb inflation and, if there is a recession, how bad/prolonged it is.

This time round it is different.

High prices will stop people spending especially if they don't get pay rises at all or equal to inflation.

[Whorty]

Look again

Oops, sorry, was on a call and didn't read the small print .... my apologies

[jamesbrown]

Agree that stamp duty is a tulipty tax, particularly in the way that it inhibits free movement, but they are not getting rid of it for that reason - they are simply trying to pump the housing market up again (and they'll probably succeed..).

They are, but I think they will fail because interest rates trump absolutely everything and all these tax cuts will ultimately contribute to inflation (both directly and via Sterling depreciation), if they succeed, and that will, in turn, contribute to increased interest rates.

[DealorNoDeal]

...interest rates trump absolutely everything...

Anyone on the SVR is going to feel a lot of pain if the base rate goes from 0.5% to 4% in a year. Same goes for anyone on a fixed rate which ends within the next 12 months. If you haven't already switched to a longer term fixed rate, it's probably too late now, especially after today.

People may be thinking that higher interest rates will be a short-term phenomenon but I wouldn't bank on that.

And, as you say, energy price cap + tax cuts may end up fuelling inflation and keeping interest rates higher for longer.

[Protagoras]

If you mean the utility providers, they're on wafer-thin margins, which is why many of them have gone down the pan.

It's true that the energy suppliers are on thin margins. Subsidising the prices supports them making more money even on a similar margin, but it's perhaps not a bad thing that they have some more money to invest in customer service.

However, there seems to be a reluctance to address fundamental issues, particularly in the electricity 'market' where the marginal price is set (mostly) by gas and certain generators arguably receive 'excessive' profits. I think that in the long term market reform, or maybe even nationalisation, is needed.