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Politics 2020 (Read 312301 times)

Wellsy

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#2850 Re: Politics 2020
September 26, 2022, 10:52:16 am
I maybe overegged the pudding but I can't think of a worse budget since Osborne and even then I think this is more wrong headed

This budget will cause interest rates to be driven up, it will worsen inequality and it will spook the markets. Household income will take a hit from inflation well beyond any tax relief, and I think investment in resilient improvement in productivity will actually fall in real terms as high inflation and interest rates means it falls behind. Housing inequality and regional inequality will also get worse. Its a bad budget and I think it'll result in a worse economy and society.

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#2851 Re: Politics 2020
September 26, 2022, 11:53:56 am
The corporation tax cut alone is huge and has potential to release large sums for companies to spend on all sorts of things (potentially including wage increases for staff to keep up with inflation).
can I point out that there is no cut in corporation tax...simply the removal of an uplift.
Businesses will have planned for the increase in their forecasting though.

Corporation tax is paid on company profits isn't it? (i.e. after overheads / expenses). So if a company reinvests by taking on more staff, wage increases, extra training etc then it would reduce their tax liability. Even some investment in new plant and machinery can reduce it further.

Wouldn't a forecasted rise in corporation tax be an incentive to reinvest in your business as a way to reduce that tax liability instead of having the money just disappear off to HMRC? (assuming reinvesting in the business is a priority over massive dividends).

petejh

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#2852 Re: Politics 2020
September 26, 2022, 12:21:08 pm
I suspect the answer to that can be guessed at by imagining if 'the business' was your own company. How would you go about allocating capital. Especially if some of that capital isn't yours to begin with.

And there's no correct answer in this case, or economists wouldn't exist and it would all just be an exercise in accounting. But a higher rate of tax takes more money away from a business than a lower tax rate, per unit of profit. The logical extreme to minimise tax therefore is to make no profit. And the logical extreme to maximise profit is to pay no tax (or other overheads such as labour). Obviously neither are realistic*.


*Unless you're a self-employed rope access contractor on high wages but with extremely high capital expenses for 'equipment...' (which doesn't exist or is part of your lifestyle), and thus make no profit. And even if any profit was made you don't pay income tax as you pay yourself a dividend. Then it's very realistic.
« Last Edit: September 26, 2022, 12:27:39 pm by petejh »

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#2853 Re: Politics 2020
September 26, 2022, 12:31:18 pm
Everyone using a simple supply and demand model to think about the effects of corporate taxation on growth should read this thread:

https://twitter.com/Gilesyb/status/1572607019928129537?s=20&t=6z9-_sCxpczx_Y3J3o0Iaw

Tl;dr it is extremely ambiguous for many reasons. I haven’t read the paper it is based on so don’t understand the specifics very well at all I’m afraid but this kind of set of results that is very sensitive both to model choice and when and where you study is really common. As Pete says, if it wasn’t this would all just be accounting.

I would love a government that really wanted economic growth and had some decent policies for that but Truss et al is not that government. There are lots of things one could do to try and push growth a little but I don’t think tax cuts funded out of borrowing - spending that is only sustainable if the U.K. reverses a 14 year long trend very quickly - is really the way to go.

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#2854 Re: Politics 2020
September 26, 2022, 01:38:37 pm
Corporation tax changed to 19% in 2017. So it has been 19% for 5 years. It was 20% for 2 years before then too so it has been at roughly the same level for 7 years now.

In May this year the previous chancellor said corp tax would go up to 25% from April 2023. Last Friday this future rise was cancelled. So corporation tax will now change by 0% i.e. stay exactly the same as it has been for ages. There is no actual tax cut.

I understand the theoretical argument that *actually* cutting tax might encourage investment = increased growth. So question - how does keeping everything as it is, at 19%, do the same thing? I understand the argument about business forecasting / expectations being adjusted, but I can't help thinking it looks like a two card trick - we will be back to the status quo surely? Where does the growth come from?

petejh

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#2855 Re: Politics 2020
September 26, 2022, 01:57:18 pm
I guess for something to grow the first condition is it has to be born, and then it has to not die. Rising the rate of corporate tax by 6% into a recession didn't look sensible for helping existing businesses survive, nor attractive to new business investment. This move alters that dynamic. Then I suppose there's the relative rates to consider, if the average in the EU is 20.5% then perhaps some business will decide to invest in the UK when taking things such as new policies on regulation and income tax into account, alongside the rate of corporate tax.  Although a lot of tech prefers Ireland with their 12% corporate tax. https://tradingeconomics.com/country-list/corporate-tax-rate?continent=europe

edit, meant to add I wonder how much of the 'growth'  logic is based on competing with Europe, and takes a view on the direction of travel for the EU economy and EU policies. And therefore relies on relative changes rather than absolute change.

Who knows.
« Last Edit: September 26, 2022, 02:25:42 pm by petejh »

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#2856 Re: Politics 2020
September 26, 2022, 03:11:03 pm
I'm pretty sure international tech prefers Ireland because it is low tax AND in the EU. I don't see our non-rise as being very tempting in that context.

Brexit is having massive ongoing effects, though the news don't like to talk about it. Getting Petzl kit from France used to take us 3 days. It now takes ten days minimum, and more usually 6-8 weeks.

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#2857 Re: Politics 2020
September 26, 2022, 03:25:27 pm
I'm pretty sure international tech prefers Ireland because it is low tax AND in the EU. I don't see our non-rise as being very tempting in that context.

Brexit is having massive ongoing effects, though the news don't like to talk about it. Getting Petzl kit from France used to take us 3 days. It now takes ten days minimum, and more usually 6-8 weeks.
This afternoon, I placed orders for machinery to the tune of €1.2M. I went with Dutch suppliers (to the UAE) over the UK (and US for straight currency reasons) because the Euro is down significantly (and with credit letters on the orders I’m buying those Euros today). Even though the Pound has tanked today, the UK manufacturers were offering more than 3 months greater lead time on production than EU suppliers, simply because the UK guys can’t get their parts in fast enough. We’re talking major marine Engine and Generator manufacturers here, not small bespoke stuff.
Of course, next week, on the next purchasing round, that might be completely different; however, today, Brexit made more difference than the drop in the pound (which should have made the order dirt cheap (ha ha) but didn’t compensate for 3 months delay in production here).

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#2858 Re: Politics 2020
September 26, 2022, 04:02:57 pm
The chancellor's connections point the way. 
Tanking the pound is deliberate, this is a hedge funders budget and fairly straightforward political corruption.
They don't give a hoot about the economy per se just how much benefit can be extracted through (mis)managing it.

Good to see the LP conference backing renationalization of the railways, and a Ł15 an hour minimum wage, and supporting all LP MPs to attend picket lines today. 

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#2859 Re: Politics 2020
September 26, 2022, 04:56:01 pm
I'm pretty sure international tech prefers Ireland because it is low tax AND in the EU. I don't see our non-rise as being very tempting in that context.

Brexit is having massive ongoing effects, though the news don't like to talk about it. Getting Petzl kit from France used to take us 3 days. It now takes ten days minimum, and more usually 6-8 weeks.

Worth remembering when reading things like this, and Matt's post, that the Brexit deal we ended up with is generally thought to be worse for trade in services than in goods. And of course services are our competitive advantage...

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#2860 Re: Politics 2020
September 26, 2022, 05:53:26 pm
Quote
“This is simply not a moment for the kind of naďve wishful thinking supply side economics that is being pursued in Britain… I think Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time.” - Former US Treasury secretary Larry Summers last Friday.

Pretty much sums up the shambles.

What is going on is a complete and utter disaster.
It's the kind of economic insanity that made it impossible to vote for Jeremy Corbyn last time around.  He'd have ballooned government debt by spending ridiculous amounts on pretty much everything.  The extreme right wing of the Tory party are now ballooning goverment debt by cutting taxes at a monumentally stupid time purely because of ideology. 

It is going to achieve next to nothing, because the fundamental problems affecting business are cost of energy, lack of staff and red tape at borders.
The first one is obviously mainly due to the war in Ukraine but partly also due to the pound not being worth anything because of Brexit and economic insanity on behalf of the UK government.
The second is partly due to the pandemic where staff left and never returned, and partly due to Brexit.
The third is entirely due to Brexit.

Reducing taxes when you have high unemployment can boost the economy and thus the tax take.  But we do not have high unemployment.  We've got a massive shortage of labour.  So reducing taxes at this point isn't going to attract more companies or allow existing ones to grow as they haven't got the staff to run as they are currently.

So they are ballooning UK debt in a futile effort to increase growth, to try and make the total clusterf*ck that is Brexit, the war and the pandemic not cause the huge recession that is coming otherwise.
But ballooning UK debt is just making the pound slide and thus increasing inflation, whilst not actually resolving any of the three fundamental problems facing UK businesses.

Sure, the Bank of England will step in and increase interest rates to sure up the pound, but by the sound of things all that's going to do is give the clowns in government the thought that they have more wiggle room to reduce taxes even more.

Whilst I totally disagreed with all sorts of specific policies from John Major's goverment through the Labour ones through to Cameron.  I'd take pretty much any of those governments at the moment over what we've had since the Brexit vote.  The lunatics on the right of the Tory party - from Jacob Rees Mogg to John Redwood, from Mark Francois through to the new chancellor, are driving the country off an enormous cliff and everyone just seems to be sitting back and and taking it.

It would help if the Labour party stopped being so completely and utterly useless, moved into the 21st century, got rid of their ties to the unions and made it policy to at least reverse leaving the single market and customs union - if not rejoining the EU fully.

But of course that's not going to happen without a complete rejig of how political parties are funded and a shift in the mindset in the country around Brexit.  At the moment, noone is talking about it because it's apparently been too divisive.  Which is pathetic.  Does anyone think Nigel Farage would have stopped talking about it if they'd lost 52% to 48%.

Maybe in a few decades, we'll wake up, rejoin the EU from a vastly weaker position than we were in before we left.
And then slowly rebuild the economy.

But more likely before then we'll end up needing an IMF bailout, Scotland, NI, Wales will probably have left, and we'll be sat here with a bunch of flag waving clowns living in poverty, still singing God save the queen.

I despair.

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#2861 Re: Politics 2020
September 26, 2022, 06:28:55 pm
Over the summer I read the manuscript of a colleague's forthcoming book on the Creditanstalt crisis of 1931, an Austrian banking crisis that morphed into a highly contagious financial/monetary crisis, ripping through Germany and culminating in Britain's exit from the Gold Standard on September 19th of the same year. It's a remarkable book; microscopically focused on key protagonists (in key central banks, the then new Bank of International Settlement, leading private banks) as they struggle through a sense-making process that tested their existing frames for understanding international banking and the role and limits of central bank action. It's a book not about the causes of the crisis but one that attempts to tell history forward - prospectively - rather than backwards - retrospectively - to understand the decision making of the actors in the moment.

We are not in anything like so serious a position for the moment, but I couldn't help but think about what sense-making processes must be taking place right now as all kinds of people, not least the BoE, struggle to understand how they should act. However, one suspects that Truss and Kwarteng's frames of reference and understanding are so far immune to such jolts and crises of confidence.

Wellsy

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#2862 Re: Politics 2020
September 26, 2022, 09:29:09 pm
I suspect the answer to that can be guessed at by imagining if 'the business' was your own company. How would you go about allocating capital. Especially if some of that capital isn't yours to begin with.

And there's no correct answer in this case, or economists wouldn't exist and it would all just be an exercise in accounting. But a higher rate of tax takes more money away from a business than a lower tax rate, per unit of profit. The logical extreme to minimise tax therefore is to make no profit. And the logical extreme to maximise profit is to pay no tax (or other overheads such as labour). Obviously neither are realistic*.


*Unless you're a self-employed rope access contractor on high wages but with extremely high capital expenses for 'equipment...' (which doesn't exist or is part of your lifestyle), and thus make no profit. And even if any profit was made you don't pay income tax as you pay yourself a dividend. Then it's very realistic.

Whatever analysis of business decisions we make, it needs to take into account that they'll struggle to borrow for the foreseeable future, as available rates on borrowing are shooting up.

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#2863 Re: Politics 2020
September 26, 2022, 09:49:17 pm
Quote
“This is simply not a moment for the kind of naďve wishful thinking supply side economics that is being pursued in Britain… I think Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time.” - Former US Treasury secretary Larry Summers last Friday.

Pretty much sums up the shambles.

What is going on is a complete and utter disaster.
It's the kind of economic insanity that made it impossible to vote for Jeremy Corbyn last time around.  He'd have ballooned government debt by spending ridiculous amounts on pretty much everything.  The extreme right wing of the Tory party are now ballooning goverment debt by cutting taxes at a monumentally stupid time purely because of ideology. 

It is going to achieve next to nothing, because the fundamental problems affecting business are cost of energy, lack of staff and red tape at borders.
The first one is obviously mainly due to the war in Ukraine but partly also due to the pound not being worth anything because of Brexit and economic insanity on behalf of the UK government.
The second is partly due to the pandemic where staff left and never returned, and partly due to Brexit.
The third is entirely due to Brexit.

Reducing taxes when you have high unemployment can boost the economy and thus the tax take.  But we do not have high unemployment.  We've got a massive shortage of labour.  So reducing taxes at this point isn't going to attract more companies or allow existing ones to grow as they haven't got the staff to run as they are currently.

So they are ballooning UK debt in a futile effort to increase growth, to try and make the total clusterf*ck that is Brexit, the war and the pandemic not cause the huge recession that is coming otherwise.
But ballooning UK debt is just making the pound slide and thus increasing inflation, whilst not actually resolving any of the three fundamental problems facing UK businesses.

Sure, the Bank of England will step in and increase interest rates to sure up the pound, but by the sound of things all that's going to do is give the clowns in government the thought that they have more wiggle room to reduce taxes even more.

Whilst I totally disagreed with all sorts of specific policies from John Major's goverment through the Labour ones through to Cameron.  I'd take pretty much any of those governments at the moment over what we've had since the Brexit vote.  The lunatics on the right of the Tory party - from Jacob Rees Mogg to John Redwood, from Mark Francois through to the new chancellor, are driving the country off an enormous cliff and everyone just seems to be sitting back and and taking it.

It would help if the Labour party stopped being so completely and utterly useless, moved into the 21st century, got rid of their ties to the unions and made it policy to at least reverse leaving the single market and customs union - if not rejoining the EU fully.

But of course that's not going to happen without a complete rejig of how political parties are funded and a shift in the mindset in the country around Brexit.  At the moment, noone is talking about it because it's apparently been too divisive.  Which is pathetic.  Does anyone think Nigel Farage would have stopped talking about it if they'd lost 52% to 48%.

Maybe in a few decades, we'll wake up, rejoin the EU from a vastly weaker position than we were in before we left.
And then slowly rebuild the economy.

But more likely before then we'll end up needing an IMF bailout, Scotland, NI, Wales will probably have left, and we'll be sat here with a bunch of flag waving clowns living in poverty, still singing God save the queen.

I despair.

As well as Brexit having screwed farmers, fishermen,  scientists,  students, travel companies....

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#2864 Re: Politics 2020
September 26, 2022, 10:37:04 pm
https://news.sky.com/story/labour-party-conference-live-battle-lines-drawn-with-mini-budget-frontbencher-says-labour-shouldnt-reverse-basic-rate-income-tax-cut-12593360


Sky news reports:
Labour have largest lead over Tories in more than 20 years - poll suggests
There’s some good news for Labour at the end of day two of the party’s conference in Liverpool with a new poll suggesting that Sir Keir Starmer’s party has surged to its largest lead over the Conservatives in more than two decades.

A YouGov poll for The Times newspaper tonight puts Labour 17 points clear of the Tories — a level of support not seen since former leader Tony Blair won his landslide victory in 2001.

It comes days after Chancellor Kwasi Kwarteng’s tax-cutting mini-budget.

The survey also reveals widespread public opposition to these measures, with the decision to scrap the 45% rate of tax for those earning more than Ł150,000 opposed by 72% of voters - including 69% of those who backed the Conservatives in 2019.

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#2865 Re: Politics 2020
September 27, 2022, 11:17:07 am

It would help if the Labour party stopped being so completely and utterly useless, moved into the 21st century, got rid of their ties to the unions and made it policy to at least reverse leaving the single market and customs union - if not rejoining the EU fully.


Out of interest, what do you think is useless? Labour are polling very well at the moment. The above reads like a combination of Conservative soundbites and extremely wishful thinking re rejoining the EU (which I agree with, but think is politically impossible and thus pointless to agitate for).

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#2866 Re: Politics 2020
September 27, 2022, 11:36:28 am
Out of interest, what do you think is useless?
Labour delegates overwhelmingly back motion for Labour party to embrace PR. Labour leadership: no.

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#2867 Re: Politics 2020
September 27, 2022, 11:45:29 am

Labour delegates overwhelmingly back motion for Labour party to embrace PR. Labour leadership: no.

I'd like PR as well, but I can see the political logic behind not committing to a radical restructuring of UK politics when your whole schtick has been to not scare the horses.

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#2868 Re: Politics 2020
September 27, 2022, 12:01:37 pm
I think that's it isn't it. Starmer's plan seems to be "play it cool, nice boring march to victory, then decide these things" and tbh it works for the Tories

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#2869 Re: Politics 2020
September 27, 2022, 12:06:25 pm
What spider monkey said. Right now the agenda seems to be outlining a different direction for the economy without proposing any fundamental changes which could potentially scare off voters.

By being pretty bland either unintentionally or by design starmer isn’t giving the tories and associated media much ammunition.

Fingers crossed we breeze through the next election and he turns out to be more left wing than he’s currently fronting to be ( potentially wishful thinking I know ).

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#2870 Re: Politics 2020
September 27, 2022, 12:11:29 pm
This summed up best the direction of travel for this new administration for me:tweet

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#2871 Re: Politics 2020
September 27, 2022, 12:20:45 pm
it works for the Tories

I don't think it does work for the Tories, thats my point. If Starmer was to make a barnstorming speech today saying he was going to rejoin the single market/customs union/EU or introduce radical electoral reform it would be front page of all the papers and knock the Tories fucking up the Budget off them. It would also be incredibly easy to counter with 'Labour want to reverse the referendum result' or 'Labour want to stitch up the system to benefit themselves' (I know the latter is unfair but thats how it would be presented.

Currently it will suit Starmer just fine to have the front pages about Tory economic turmoil, and a boring but competent piece on his conference speech on page 4 or 5 of the papers. It will perfectly position him as the competent alternative to visible incompetence. I understand people want more (in an ideal world I do too) but the political logic is inarguable right now.

Incidentally theres been some good left wing policies coming out of the conference so far on green energy, nationalising the railways and a UK sovereign wealth fund.

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#2872 Re: Politics 2020
September 27, 2022, 12:30:20 pm
it works for the Tories

I don't think it does work for the Tories, thats my point. If Starmer was to make a barnstorming speech today saying he was going to rejoin the single market/customs union/EU or introduce radical electoral reform it would be front page of all the papers and knock the Tories fucking up the Budget off them. It would also be incredibly easy to counter with 'Labour want to reverse the referendum result' or 'Labour want to stitch up the system to benefit themselves' (I know the latter is unfair but thats how it would be presented.

Currently it will suit Starmer just fine to have the front pages about Tory economic turmoil, and a boring but competent piece on his conference speech on page 4 or 5 of the papers. It will perfectly position him as the competent alternative to visible incompetence. I understand people want more (in an ideal world I do too) but the political logic is inarguable right now.

Totally agree, was going to say similar but well said.

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#2873 Re: Politics 2020
September 27, 2022, 01:09:36 pm
Incidentally theres been some good left wing policies coming out of the conference so far on ... ... ... and a UK sovereign wealth fund.

Just to note (not a commendation or a condemnation of either 'wing'), that a sovereign wealth fund is part of the tory's mini-budget policies. So I'm not sure it can be called a left wing policy. Perhaps just a 'sensible' policy.

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#2874 Re: Politics 2020
September 27, 2022, 01:13:56 pm
it works for the Tories

I don't think it does work for the Tories, thats my point. If Starmer was to make a barnstorming speech today saying he was going to rejoin the single market/customs union/EU or introduce radical electoral reform it would be front page of all the papers and knock the Tories fucking up the Budget off them. It would also be incredibly easy to counter with 'Labour want to reverse the referendum result' or 'Labour want to stitch up the system to benefit themselves' (I know the latter is unfair but thats how it would be presented.

Currently it will suit Starmer just fine to have the front pages about Tory economic turmoil, and a boring but competent piece on his conference speech on page 4 or 5 of the papers. It will perfectly position him as the competent alternative to visible incompetence. I understand people want more (in an ideal world I do too) but the political logic is inarguable right now.

Incidentally theres been some good left wing policies coming out of the conference so far on green energy, nationalising the railways and a UK sovereign wealth fund.

Sorry I wasn't clear! I totally agree with you tbh. What I mean is that what works for the Tories traditionally, both in internal and general elections, is do whatever you need to do to get in power and then once you're in power you can argue between yourselves in terms of what you want to do. I think Starmer wants to do what's needed to win an election, not risk it, let the government hang itself, and then after winning look at more in depth reform options.

Absolutely Labour and the Tories get a different response re. more radical ideas from general discourse, and their path to power is different.

 

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