Osbornes budget

[aeolium]

Both in this budget and in the general economic policy of the government there seem to be plenty of echoes of 1980s policy. Here, as then, there were reductions in income tax for both the highest rate taxpayers and basic rate taxpayers. Here, as then, there were reductions in both eligibility for welfare benefits and the amount of benefits for certain classes of welfare applicants (Thatcher was actually more generous to the disabled than this government). Here, as then, there were reductions in taxes for business and corporations. Here, as then, there has been a very strict package of austerity measures driving down public expenditure to reduce debt, incidentally driving up unemployment significantly. Here, as then, there were measures to cut red tape for business, to deregulate and increase the flexibility of the labour force, now even to the point of encouraging people to work for nothing for a certain period. Here, as then, was the policy to purchase a Trident nuclear system even at a time of serious cuts in defence spending. Osborne has even revived the concept of Enterprise Zones first introduced by Thatcher over 30 years ago. Here, as then, are the policies to increase private participation in the public sector, then principally by privatising utilities, now by increased private provision in education, road transport and health. Extraordinarily, even after the greatest financial crisis in modern British history due in large part to the extensive deregulation in the financial services which was started by Thatcher in the 1980s, there is a refusal to admit that the enormous rise in public debt in recent years was due to the bailout of financial institutions, and not to excessive government expenditure. Consequently there is a reluctance to impose any kind of tough regulation on the financial services other than the feeble 'firewall' plans scheduled for implementation as far away as 2019.

It really does seem to be 'forward to the past'

[french frank]

I would agree with just about everything that aeolium says. Though much of the 'Thatcherism' continued under Labour (such as the deregulated financial services which ended in the ruinous collapse and rescue which he mentions).

Which is why I'm far from defending the budget or the financial record of the coalition. But these questions seem far more important than the matter of the age-related allowance 'freeze' (or the cut in the top rate of tax).


Also, the figures I quoted for the relative amount of income tax paid weren't to demonstrate that the rich shouldn't be taxed more (as I said) but that under the capitalist system as it is, we actually need the rich. I don't think we need to be 'grateful' to them though.

[french frank]

Clearly the message taken from what I was saying differs depending on your standpoint. I would be in the camp that sees these obscenely high salaries as a (probably) inevitable result of global capitalism, and that they're wrong in principle. This isn't the same as successful dynasties building up personal fortunes: it's pretty nondescript individuals getting in on the system, legging it up the ladder and getting fat as much on their mistakes as on their successes.

But the main point is that, in current circumstances, we need them as substantial contributors to the income tax revenue. Forget about being grateful to them. They're the ones who should be 'grateful' and I doubt they are.

The point about the 'objections' to the line this budget (and the Tories in general) has taken is that they show that there's more than one way to skin a cat and some are preferable to others. Some are quick fixes, others aren't. Upping the personal allowances is a quick fix; creating jobs isn't. Doing one thing shouldn't preclude doing the other.

I have absolutely no idea how growth is achieved (though I would assume that if it was obvious and straightforward it would have been done; I would also assume that for the purposes of this discussion, your argument depends on who you read and approve of).

What I do know about - from a completely lay position - is the matter of the age allowance freeze, so, to the general economy later...

The thinking is that people who have an income of £12,000, £15,000, £18,000, £21,000, £24,000 should be given the same tax break in terms of personal allowance, regardless of whether they are working or pensioners. (Agree or disagree?) Pensioners still have other allowances in terms of free prescriptions, free bus travel, free winter fuel allowance, without tax implications. They are more likely to own their own house, so have much lower accommodations cost and if they aren't working the have no NI payments.

Wolf takes the view that this is 'ridiculous' I assume because he thinks it isn't cost effective?

[eighthobstruction]

With a great many of these proposals [inc changes in pension rights/and wages for those not far from retirement]....it is those who are approaching retirement (and who have missed out on housing bubble ££££ phenomena) that will be fairing the worst, and must surely be wondering re their security in their remaining years....

[aeolium]

The thinking is that people who have an income of £12,000, £15,000, £18,000, £21,000, £24,000 should be given the same tax break in terms of personal allowance, regardless of whether they are working or pensioners. (Agree or disagree?)

I'm not sure exactly how and when the idea of age-related personal allowances came about, but could one reason for them be the fact that the state pension that forms part of the pensioner's income has in part been funded by NI contributions and also the oocupational or personal pension which would form the other main source of income (and tip the pensioner into tax liability) has already effectively been taxed once - i.e. it has come from money which the pensioner has accumulated from taxable income or employee contributions to the pension? In this it differs from the income of working people which is being taxed for the first time (apart from savings income).

[scottycelt]

The thinking is that people who have an income of £12,000, £15,000, £18,000, £21,000, £24,000 should be given the same tax break in terms of personal allowance, regardless of whether they are working or pensioners. (Agree or disagree?) Pensioners still have other allowances in terms of free prescriptions, free bus travel, free winter fuel allowance, without tax implications. They are more likely to own their own house, so have much lower accommodations cost and if they aren't working the have no NI payments.

Yes, but their actual income is likely to be considerably lower than the current average wage and they have built up such benefits over a working lifetime (if they are lucky). It would appear that pensioners are now almost classed as 'scroungers', because they no longer work, and therefore have the effrontery to currently receive these age-related benefits.

I suspect most pensioners themselves would accept that none of these benefits are 'rights' and they must also accept some extra 'pain' in reducing the deficit, but they appear to have been singled out for such treatment in the budget while others have gained, notably the very rich.

I'm not an economist, either, but all this just doesn't seem particularly 'fair', especially when one considers the very sneaky and dishonest way the news was almost mumblingly delivered by Boy George on Wednesday.

[Flosshilde]

Incidentally, the raising of the personal allowance is in my view a really great move, and probably the one thing that the libdems can be proud.

But is it? There is comment (from, I would think, reliable sources) that for many it will push them above the limit for council tax relief & other benefits, cancelling out the extra income they will have from the reduction in tax paid.

From the Guardian's Budget supplement -

But poorer working families who get housing and council tax benefits will be just £33 a year better off from the tax threshold rise, because as their income goes up their benefits will go down.

According to Citizens Advice, for every person who is eligible to pay tax and gets council and housing tax benefit, the Department for Work and Pensions will claw back £187 of their £220 annual gain.

The Citizens Advice chief executive, Gillian Guy, said: "The poorest working families will feel the government has turned its back on them. They needed this budget to ease the pressure on their purse strings and make life easier. Instead they see high earners getting tax cuts.

"Raising the personal tax allowance is an empty gesture to struggling families on low wages who get housing and council tax benefits.

"For these families, the weekly gain is less than the price of a loaf of bread; a measly 63p per week."

[aka Calum Da Jazbo]

well i could take much of the general unpalatable measures in this budget if i for one minute believed that the tax evasion/avoidance was going to be really tightened for the wealthy 20%and that there was an effective plan to make the government a much more effective honest steward of the public's money .... since pigs will fly before those two statements can be seen to be the case in the UK i will not take one milligram of unfairness in any direction from the millionaires and their brats currently in this Cabinet .... if the debt is a national emergency [and it sure is big] then we need a government with a different set of values and mind set to this one ... and not Messrs Balls and Milliband .... so we are in a deep hole ....

[Flosshilde]

It does seem to be completely bonkers for Osborne to say that as the 50% tax rate doesn't bring in as much as it should because of tax evasion he will abolish it, & then make up the shortfall by tightening up on tax evasion. Why can't he do the latter without doing the former?

[Lateralthinking1]

Those right in the middle - were to get what they earned, with no taxes and no benefits, they'd be worse off. That how staggeringly large is the contribution made by those who earn the most.......and a little gratitude wouldn't go amiss.

Worse off in what way? I was a middle income earner. Often right in the middle. I don't recognise what you are saying about me as the truth at all. In fact, I would say my situation was quite the reverse of your presentation of the situation.

As for the percentages of who is paying for whom, the key point for me is that it is tax on income, wherever it may fall. It is the difference between emphasising who has it and how much of it there is in total.

I find the individualism underpinning the "this is mine" arguments a little far-fetched. First, peoples' incomes vary, often in and out of various tax bands. It isn't always the same people. Secondly, in most cases, arguably all, anyone's income derives from interaction with others. No man or woman is an island. Most even need others' help to set up accounts in the Cayman Islands.

[french frank]

I'm not sure exactly how and when the idea of age-related personal allowances came about, but could one reason for them be the fact that the state pension that forms part of the pensioner's income has in part been funded by NI contributions and also the oocupational or personal pension which would form the other main source of income (and tip the pensioner into tax liability) has already effectively been taxed once - i.e. it has come from money which the pensioner has accumulated from taxable income or employee contributions to the pension? In this it differs from the income of working people which is being taxed for the first time (apart from savings income).

I think the differential allowance (as distinct from the older 'age relief' which was introduced in the 1920s) came in quite recently; as far as the historic NI contributions are concerned, that's only partially applicable since no pensioner with an income above £29,000 gets it (they just revert to having the normal allowance, which is what is now proposed for all pensioners), and it's gradually withdrawn from those who have an income above £24,000. If NI contributions had been considered in that way, all pensioners would have received a full pensioner's allowance; but they didn't and, as far as I'm aware, never had.

On whether raising the personal allowance threshold is a good thing or not: it is a bit aback-taking to discover that when a policy aimed at helping the lower paid is, happily, being introduced, all the arguments appear that, on the contrary it is 'ridiculous' and counterproductive.

Increase in the bank levy to pay for the reduction in corporation tax? Was that a move to encourage growth and create jobs? Or does it mean there will be less credit available for people wanting to start businesses and create jobs?

[Lateralthinking1]

On the earlier posts, I also agree with aeolium that there are similarities with the 1980s. There are also considerable differences:

- The top rate of income tax then was much higher.
- Margaret Thatcher honoured, and strongly supported, public sector pensions and compensation for job loss.
- Private sector pensions were then on a sound footing.
- Young and middle aged people were wholly committed to paying for support for the elderly.
- The banks then were more efficient, more ethical and less inclined to break the law.
- The financial institutions and all public bodies were as concerned about reputation as they were lawsuits.
- There was far less organised lobbying by the financial sector and attempts to override voter choice.
- Any discussion of part-privatising the NHS was taboo and any action unthinkable.
- There were stronger commitments to the disabled.
- Policy wasn't having to be shaped following a decade of three wars and bank bailouts.
- There was not a large part of the population that had grown up thinking of monetarism as the norm.

Our parents in middle age paid for the pensions of their parents. The middle aged now are currently paying partly for the pensions of the elderly, partly for their own and partly for those younger. The young appear to have such low demands of their offspring that they have ruled out any expectation that their pensions will be paid for by them. This needs to change. Paying for two generations is enough, particularly when it is possible that money could be in abundance in 50 years time.

As for income tax, the higher taxpayers have actually enjoyed artificially low rates because we have subsidised wars that largely benefit them and bank bailouts that have largely benefited them. It isn't as if the services they have helped to pay for have excluded them. They have drawn child benefits even as millionaires, had extensive NHS treatment even as millionaires, used public roads even as millionaires. Bill Gates may have the wealth of several countries. Most of the wealthy haven't. They need to accept that they like us are merely individuals and nothing more than a small part of this country and its laws.

[Serial_Apologist]

I keep on hearing that cliche, "wealth creators", applied to the employer class. The owners of the property and its means of production are not, repeat not "wealth creators": those they employ to make things and add value to the transmission from base materials to finished commodities are the wealth creators. The rest just pile it up and/or move it around.

[ferneyhoughgeliebte]

I keep on hearing that cliche, "wealth creators", applied to the employer class. The owners of the property and its means of production are not, repeat not "wealth creators": those they employ to make things and add value to the transmission from base materials to finished commodities are the wealth creators. The rest just pile it up and/or move it around.

[aeolium]

On the earlier posts, I also agree with aeolium that there are similarities with the 1980s. There are also considerable differences:

- The top rate of income tax then was much higher.
- Margaret Thatcher honoured, and strongly supported, public sector pensions and compensation for job loss.
- Private sector pensions were then on a sound footing.
- Young and middle aged people were wholly committed to paying for support for the elderly.
- The banks then were more efficient, more ethical and less inclined to break the law.
- The financial institutions and all public bodies were as concerned about reputation as they were lawsuits.
- There was far less organised lobbying by the financial sector and attempts to override voter choice.
- Any discussion of part-privatising the NHS was taboo and any action unthinkable.
- There were stronger commitments to the disabled.
- Policy wasn't having to be shaped following a decade of three wars and bank bailouts.
- There was not a large part of the population that had grown up thinking of monetarism as the norm.

Yes, of course there were plenty of differences, Lat1. Thatcher reduced the top rate of tax from 83% to 40% during her period in office. I'm not sure what you mean on your second point; she was certainly responsible for a lot of job losses in both public and private sectors and the compensation for the jobs lost by the miners, for instance, was not great. Private sector pensions were not on a sound footing, at least legally: the Maxwell pensions scandal broke just months after Thatcher left office, and there was also the widespread misselling of personal pensions brought about as final salary schemes were progressively closed. I don't think the banks were any more ethical - just that they were more constrained by regulation. AFAIK they didn't break the law leading up to the financial crash - that was part of the problem, that their reckless gambling was entirely legitimate and part of the 'system'. No-one in the financial world has been convicted as a result of what happened, at least in the UK. There was quite a lot of lobbying at that time, but of course the financial sector had the government on its side and did not really need to lobby. I don't think part-privatising the NHS was 'unthinkable' at that time - it was just unsayable, though arguably the reforms introducing the internal market to the NHS which Thatcher brought in at the end of her period in office (and carried on enthusiastically by New Labour) were the precursor to the increase in private involvement which the present bill provides for. I agree with your last three points but was trying to make the point that given the utter disaster of financial deregulation which was one of the landmark policies of the Thatcher era it is all the stranger that we seem to be carrying on with a failed economic theory.