Tax rises?

[Funhouse]

Yup. 42% of the welfare budget goes on pensions, and pensions increase above the rate of inflation every year.
1% of the welfare budget goes on unemployment benefit.

Guess which ones are demonised by the populists?

Demonised? Plenty of fat to cut in these figures below.

Breakdown by benefit type (2024/25 forecast)

• Universal Credit: 28% (£87.8 billion)
• Disability benefits: 13% (£41.4 billion)
• Child benefit: 4% (£13.3 billion)
• Other benefits: 6% (£19.9 billion)

[malvolio]

Quite, £12K will get you a two week cruise on Viking so most pensioners will be lucky if they can afford Ambassador, the OAP isn't capable of supporting luxuries by itself. If they double the Council tax for higher bands it won't even pay the tax on ones mansion

It's sillier than that. If my state pension goes up, my tax free allowance goes down by the same amount. So the other pension (also paid for by me over many years) returns less income. Shifting 2% from NICs to tax will make that situation worse.

On paper I'm mortgage free and worth a lot of money. In practice my disposable income is well below the National Living Wage level. And I'm a long way ahead of the income of an awful lot of retirees.

[WTFH]

Demonised? Plenty of fat to cut in these figures below.

Breakdown by benefit type (2024/25 forecast)

• Universal Credit: 28% (£87.8 billion)
• Disability benefits: 13% (£41.4 billion)
• Child benefits: 4% (£13.3 billion)
• Other benefits: 6% (£19.9 billion)

What "fat" would you suggest cutting from those figures?

[willendure]

The debt isn't the problem, the interest on the debt is. And it won't go away, in fact it will only get worse, to the point where we can't borrow any more. Money is made on the level of debt interest, so there is no incentive to let it wither away.

That aside, public sector spending is the real issue. All well and good saying infrastructure projects will generate wealth - they will but over many more years then this government has to play with - but they are only a fraction of the outgoings on welfare and public sector pay, neither of which generate wealth.

Public debt probably is not the problem, so much as private debt. Households have deleveraged since 2008, but business has not. If there is no demand for new credit in the economy, then the economy is not growing. Non-public debt overall is now way higher than even just prior to the great depression as a % of GDP.

Interest on the debt is sort of a problem, except that interest does go somewhere, out in the real economy. Also central banks can do yield curve control and otherwise manage huge public debt, as Japan has shown. But I do think too much public debt is best avoided since, fun fact, every country that ever went over 140% debt/gdp has descended into chaos or war - except Japan. But Japanese football fans stay behind after matches to tidy up the stadium!

The whole private credit/private equity bubble is probably going to be the start of the next financial crisis.

[Protagoras]

On paper I'm mortgage free and worth a lot of money. In practice my disposable income is well below the National Living Wage level. And I'm a long way ahead of the income of an awful lot of retirees.

Tax increases that further reduce disposable income will inevitably lead to people needing to liberate property equity absent sufficient income. Associated with this will be many schemes that are at best 'poor value' and this will leave such people even worse off. It will be yet another mis-selling scandal.

I'm actually considering taking out a mortgage to get tax free funds on an interest-only basis. It's looking unwise to have 'assets'. World cruises are much more appealing!

The whole private credit/private equity bubble is probably going to be the start of the next financial crisis.

+1. And there must be no further public bailouts for the financial sector. Capitalism needs to be allowed to work properly and that includes failures.

[Andy2022]

Precisely and this is what the Laffer curve tells us. Beyond a certain point, increasing taxation will have the effect of reducing the tax base by being overly punitive and incentivising people/companies to avoid whatever tax is too high. So last tax increase is likely largely responsible for the new £20bn hole - cut another $20bn and we'll just keep getting bigger and bigger holes. Taxation can be the destruction of money. You cannot make a country wealthy through taxation any more than you can lift yourself in the air by your own boot laces. Unfortunately we have a chancellor that lives in some weird leftie fantasy dream world - she is about as daft as Therasa May was. Anyway, it will all come to a sticky end fairly soon, I think and we'll have some kind of crisis, destruction and start taking a different approach.

People who bring up the Laffer Curve always tend to argue that taxes are too high whereas the evidence show even quite high tax rates can work (there’s a whole bunch of studies at the bottom of the Wikipedia article if you’re really interested)

Excluding those in the 62% band, income tax rates for the general population are relatively low in historical terms — I can remember the basic rate of income tax being at 33%

It’s debatable whether the last tax increases are responsible for the current hole in public finances — Hunt’s unfunded cuts to NI, the secret £7bn scheme to support the Afghani’s who’s records we leaked, higher interest rates and the Tories ineptitude at refinancing the debt when rates were low all contributed

What Reeves should have done first time round is undone Hunt’s NI cuts by increasing the basic rate of Income Tax, also just rolled the Winter Fuel Allowance into the state pension etc

[Protagoras]

, also just rolled the Winter Fuel Allowance into the state pension etc

There's a fundamental problem that when the price of something essential is perceived to be too high, some sort of benefit or allowance comes along as a solution.

It would be much better to fix the underlying issue for the long term. Fuel prices are too high because of policy failures - the solution needed is to fix the issue for everyone, rather than provide a winter allowance.

[willendure]

+1. And there must be no further public bailouts for the financial sector. Capitalism needs to be allowed to work properly and that includes failures.

No way in hell is that going to happen though - too big to fail! But I am sure the next crash will still shake out some of the dead wood even so.

I think next time a quicker bail out is more likely, as the "reaction function" is more primed since 2008.

[Protagoras]

No way in hell is that going to happen though - too big to fail! But I am sure the next crash will still shake out some of the dead wood even so.

I think next time a quicker bail out is more likely, as the "reaction function" is more primed since 2008.

I just can't see the people accepting 'Austerity 2' resulting from further bailouts - there would be riots!

[Fraidycat]

Excluding those in the 62% band, income tax rates for the general population are relatively low in historical terms — I can remember the basic rate of income tax being at 33%

You have to add in 15% employer NI to all the rates.

Employer NI is really paid by employees through a reduction in base pay over time.

Im currently perm, last year when Employer NI was raised by 1.2%, everyone's annual pay rise at the company was reduced by approximately the same amount. Actually a bit more than 1.2% to cover the threshold drop.

This doesn't apply to the very low end where the minimum wage is government dictated but for everyone else it does.