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QE hasn't hurt pensioners? A £25bn income hit says otherwise

New research runs counter to the Bank of England's claims that its controversial policy of stimulating the economy has had no impact on pensioners.

 

by Michelle McGagh on Sep 07, 2012 at 11:09

QE hasn't hurt pensioners? A £25bn income hit says otherwise

The Bank of England recently dismissed the idea that its policy of creating £375 billion of new money to avoid a slump has hurt pensioners. However, a report from Saga, the over-50s service company, says it has contributed to a fall in pensioners' spending power that has cost the economy £25 billion.

The research says a ‘toxic combination’ of low interest rates, overshooting inflation and quantitative easing (QE) – the process in which the Bank creates money and uses it to buy UK government debt, or gilts – has cut the spending power of 21 million older people.

The Saga report, compiled by the Centre for Economics and Business Research, is a response to the Bank’s comments last month that pensioners had not been hurt by QE. Although the QE programme has driven down gilt prices, which in turn pushes down annuity rates, or the amount of income that a pension will buy in retirement, the Bank said its programme led other assets to rise, cancelling out the negative effect.

The Bank claimed QE boosted the wealth of UK households by around £600 billion, leading to increased spending.

9% income drop

However, Saga’s research suggests Britain’s over-50s have suffered a 9% drop in real income between the first three months of 2008 and the second quarter of 2012, leading them to reduce their spending. This drop in spending is the equivalent of taking £24.7 billion out of the economy, or a 1.6% drop in GDP.

Quarterly Saga surveys show the over-50s have cut back on goods and services as they struggle with the rising cost of living. Half of older households have had to curb spending on clothes, shopping and entertainment. Three-quarters have cut back on hospitality and food.

Ros Altmann, director general of Saga, said the Bank had ‘scored an unexpected own-goal’ when it came to the over-50s. ‘This age group represents more than half of UK households and contributes nearly half of all domestic consumption, but the toxic combination of rock-bottom interest rates, spiralling inflation and QE money-printing has put a big squeeze on their incomes, forcing many to make cutbacks,’ she said.

‘This change in spending habits has not just hit their living standards, it has also sucked almost £25 billion out of the economy, reduced the Treasury’s tax take, and may have inadvertently tipped us into recession.’

Want to know more about QE? Watch this video:

'2 freaky facts about QE or quantitative easing'

Call for change

Saga is calling for a change to policy to help reverse the situation older people find themselves in today.

It wants:

  • Temporary tax breaks for capital spending to encourage businesses to execute investment plans.
  • The introduction of incentives for house building so suitable housing for older generations is available.
  • Pension fund assets to be used to invest in infrastructure and lend to small businesses, with government underpinning to mitigate risks.
  • The Bank of England to stop buying gilts at the expense of the pension system.

‘We need the authorities to look at more effective ways of reinvigorating the economy. If they want to generate growth and employment, they should be considering a plan without the damaging side-effects of QE,’ Altmann said.

The public's satisfaction with the Bank of England has fallen to its lowest level on record, according to a quarterly survey from the central bank released today. The survey showed 29% of Britons are dissatisfied with the Bank, the worst figure since the survey started in 1999.

136 comments so far. Why not have your say?

snoekie

Sep 07, 2012 at 19:28

The BoE, King and Osborne need an urgent reality check up.

If evidence given under oath, they would be liable to imprisonment for perjury, even if they exempt from prosecution fromfraudulent trading and false accounting because of their one rule for the great unwashed and immunity for the "elite".

They are no better than fraudulent accountants and book keepers, and the clerks that steal miney by false accounting entries which allows them to milk their firms/companies for £10s of thousands, millions.

Madoff was jailed for nearly 150 years for fraud/clever accounting of about $143 billion, so on that scale the above would be facing jail time of about 500 years.

Whilst we are about it, demand the extradition of the US presidents, Senate and congress for aiding and abetting the massive fraud the QE that also affected people here.

Didn't Cameron and Osbprne also promise to undo the negative affect on pensioners of some of the Brown/Balls scam? All they did was to pile on the agony.

And yes I have posted similar to this before, but the comments have been removed.

Finally, not only have the pensioners suffered, but also the BoE cannot be trusted anymore, because it now clear that as far as the BoE and the politicians are concerned, they and truth are total strangers.

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dd

Sep 07, 2012 at 19:42

It's no wonder the lottery is so popular these days. For some, it is their only hope of something more than scraping by for 30 or 40 years after having lost their jobs (too young to retire too old to be offered work) in the recession. Some pensioners may be alright but the divide amongst this group is huge and it will become more visible over the next few years, I reckon.

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David Harvey

Sep 07, 2012 at 21:30

I wonder how long it will be before people finally realise the folly of austerity. Not just QE but while we impoverish ourselves more and more everything hits pensioners. As the nation gets poorer so inevitably must the old and needy who rely on the nation and it's success. What else could happen?

We are getting deeper and deeper in trouble with every austerity measure. More unemployment, more part time workers, more on minimum wage non of which can buy industries produce and help it grow. I can't help feeling that Cameron is taking us to some point of no return worse than Brown ever did.

If we are concerned about pensioners we should do what many like myself have to and take a first hand look at what the cuts are doing not just to the pensioners but to those who care for them.

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Tony Peterson

Sep 07, 2012 at 22:06

The lies the public is being told by politicians and the BoE are simply breathtaking.

Why did 80000 boo Osborne at the paralympics? Because, I believe, that was the capacity of the stadium.

Those coming up to retirement now have been well and truly hammered. Please don't pull snoekie's comment. Everyone knows he is right.

So is David Harvey. The "deficit" is a financial fiction, like paper money itself.

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Ryan McC

Sep 07, 2012 at 23:08

Good comments above! The truth always comes out in the end whether it be 12 months, 12 years or 1200 years!

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Scottino

Sep 08, 2012 at 07:40

The QE measures hit my SIPP drawdown; along with other changes my rate was cut in half. Bank interest is sily. and I do better with premium bonds but that rate has been slashed too. Share prices haven't recovered and lack of control by BoE means bank shares held are at large unrealised losses. CGT could be abolished as at current rates I won't recover realised historical losses and future unrealised losses ever. Instead of being encouraged to spend QE forces me to figure new ways to re-instate the planned running yield. BoE should remember that savers do not consume capital, only the interest on capital. Current policy seems designed to encourage more debt and that is what has caused the current mess. I think that VAT at 20% took demand over the precipice.

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Chris Powell

Sep 08, 2012 at 07:41

The article is crap. It does not prove the BOE was wrong.

Incomes over 50's have reduced by 9%- This is bad news but nothing to do with QE.

- the over 50's could have lost their job and now can't find work?

- the state pension has not followed RPI

- we need data on the group who have taken a pension outt since the financial crash and work out their income on a much lower pension pot.

I do not disbeleive the over 50's have had it hard- everyone has. This article does not prove QE harmed pensioners. I wish Saga and Prof Ross would start to do proper research. This just shows how bad education is when even Prof's can't do proper research to answer a question.

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Chris Powell

Sep 08, 2012 at 08:07

Scottino

You were not forced to take a drawdown pension out- you should have known lower gilt yields would reduce your income. You should have taken an anuity and lump sum- you can't blame QE for your mistake.

QE does not encourage more debt- the saving rate has increased since QE

Increasing VAT increase saving because other taxes such as income tax have not gone up giving you an increased disposable income. It allows the government to reduce total public debt.

Share prices have recovered in general but if it was not for Worldwide QE they would be 30 or 40% lower than they are today and we would be in a depression roll on the 1930's (the 1930 did mean that people reduced the amount they could afford to eat which inturn increased their like expectency by 6 years). On Thursday Europe started QE and about time. European stock markets went up over 3%.

QE is the only vehicle we have but I do beleive in the longer term it will be inflationary if interest rate do not go up soon enough but that is in the future.

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dd

Sep 08, 2012 at 09:19

"- the over 50's could have lost their job and now can't find work?"

I think that this is much of the problem. The over 50s can't tick the boxes required by HR departments (eg only 10% went to University in the days when they were 18 yrs old) even though their participation in any enterprise would add value due.

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dd

Sep 08, 2012 at 09:20

Delete "due"!

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Scottino

Sep 08, 2012 at 09:33

QE drives down yields making debt more attractive if you can get it.

Bank deals are temporary; I've just been notified that my 3.5% special reverts to 0.5% in November.

Increased VAT equals higher prices, equals lower demand thus lower or nil growth.

Government spending has not yet fallen. Borrowing still increasing.

Share prices are nowhere near pre 2008 levels.

In Europe it is still all talk no action.

QE will be inflationary. It has inflated gilt prices; who'd have thought War Loan above £100. QE has driven down annuity rates to record lows.

Pensioners and savers have had it tough. Mortgagees have had a bounty.

People out of work have had it tough. You can pick any group you like but anyone in work with a mortgage has had a great deal relatively speaking.

Long run inflation in the UK has been 3.6%. If you cannot surpass that return you are being stuffed.

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dd

Sep 08, 2012 at 09:59

That's a good summary, Scottino.

Re: Government spending not yet fallen, I think that much of it is due to the time lag and the contracted promises for the future of the previous government, is it not?

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SchumpeterII

Sep 08, 2012 at 10:19

The guy on the film said, and I quote: Interest rates aren't negative yet. Errm I am afraid, that real as opposed to nominal rates, are negative. He also opined that he couldn't fault the BoE's logic. Well I can. The logic is to reduce the living standards of pensioners in order that the government can inflate away its debts. But this cannot be openly admitted for political reasons. Also not mentioned was the abolition of the 10 pence tax rates, one of Gordon Brown's little wheezes which negatively affected pensioners. Okay this wasn't the fault of the BoE but it is all part of the offensive against pensioners who are regarded as a nuisance for hanging about after their working lives are over, and who don't have the decency to die.

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snoekie

Sep 08, 2012 at 13:15

Chris, "QE is the only vehicle we have but I do beleive in the longer term it will be inflationary if interest rate do not go up soon enough but that is in the future."

Gee, I do believe you are beginning to understand what happened in the Weimar Republic, and Z im.

Funny thing though, in Zim they had to keep printing bigger and bigger denominations to allow people to buy a loaf of bread.

Curious though that Mugabe and his wife had a bolt hole in Hong Kong and millions in dollars in an account in Hong Kong. Not for him the Zim dollar, which he was printing more and more of.

Because of the lack of interest, those not in the bond/stock market are having to resort to capital to keep things together, whereas if they had a decent rate of interest on their savings their capital would have been intact.

As for an annuity, by creating money which isn't based on value there is inflation and that means that which should have been adequate doesn't go nearly as far.

Ask yourself why salaries increase? Answer to keep pace with inflation, or at least try to. The annuitant cannot do that.

Brown/Balls et al have a lot to answer for and their wealth confiscated would wouldn't even be a drop in the proverbial bucket, if spread around.

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Daye Tucker

Sep 08, 2012 at 13:20

John Swinney, Minister for Finance in Holyrood has balanced the itsy bitsy Scottish budget 4 out of the last 5 years. He brought the M74 extension in on time and under budget, he eventually called time, once he was in a majority government, on the disastrous Edinburgh Council Tram Project and has literally got that back on the rails proving his record of sound financial management of Scotland's albeit small economy. He has cut budgets across the board by 10% yet somehow his cuts don't appear as draconian to the Scots as Osborne's. Perhaps that's because his priorities include the welfare of those who contribute to their economy, past, present and future.

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john_r

Sep 08, 2012 at 22:44

Is that a joke about Holyrood - John Swinney is in a lucky situation. He has to survive on Scotland's free hand out from the UK exchequer. He doesn't have to find £15 Billion as his share of the UK's debt. And in my view Ros Altmann, director general of Saga, is equally off track - in fact it reads to me as drivel associated with someone living in an Ivory tower.

Yes pensioners are having a hard time and so are the rest of the population. And rightly so. There is only one solution and sorry but we all have to suffer. Does he not realise that the UK is £150 BILLION in debt. That equates to around £6000 debt for every family in the UK. Sorry to have to remind everyone of the UK's predicament but that is the legacy of the last government. That £6000 debt for every family has also been rising until quite recently month by month. That legacy doesn't go away when a new government comes in. What the new coalition along with the BOE has to do is two things. Stage 1 - cut spending and pay off as much interest on the loan as possible to get to a point where the debt is not rising any more. Stage 2 - keep a rein on spending and start to pay down the loan in addition to paying interest outstanding. If and when you get to this stage the outlook starts to show a bright light in the distance. Lets face it it's the same process when any individual fights his way out of financial trouble. Controlling a higher level of inflation is also in my view an acceptable tool in getting the debt down.Yes it impacts the lower paid more but to counteract that the government continues to raise the tax free allowance.

So poor pensioners are insulated. Rich pensioners such as the ones who take Saga cruises are not.

The government and the BOE have been clever in their approach in that they have adopted fiscal policies which have gained international approval and so our borrowing rates are lower and our pain is overall reduced while trying to cosset the less fortunate. Others such as Balls want to borrow more to fund job creation (but without customers). That's politics for you but if you believe borrowing more at higher levels of interest will improve your lot then take a holiday in Greece before the next election to see how well that approach works.

So for me I have to congratulate the coalition and the governor.

Well done BOE, well done government - just keep it going.

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dd

Sep 09, 2012 at 09:57

In Greece mothers are putting their children in foster care because they can't afford to feed them. That is what happens to the ordinary citizen when public servants are allowed to retire on a final salary pension at 45. I agree that the Balls solution will only make things much much worse for all of us. How much of our GDP goes on public spending? I heard 49% and thought that was high. More recently I was told 63% of our GDP. The private sector which is punished in every respect whether it is tax or red tape or pensions cannot support such government expenditure. Brown carefully ensured that many of his spending promises would hit the future government and future tax payers. I have to agree with much of what you say, John_r

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David Harvey

Sep 09, 2012 at 10:29

Some people seem to have their heads stuck in numbers and forget that eventually what goes around comes around. The simple fact is poverty breeds poverty and poverty in the masses can only mean more poverty for those like pensioners who cannot support themselves. But it will also mean a struggle for business as companies realise they have no one to sell their wares to.

We can do so much better than this we have some of the finest minds in the world. Why is this daft government allowed to continue? The country didn't even vote for right wing. Where is the democracy that we say we have?

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dd

Sep 09, 2012 at 11:05

"What goes around comes around"

Precisely. When public servants pay into their pensions, or when they pay tax, the fact is that it is paid for from the money they have earned in their salaries. It is not new money. Their salaries are paid from taxation.

In order to raise such amounts of tax to be able to provide for the public servants, the public services and benefits to the poor, the private sector must be allowed to thrive.

Instead, it is beaten around the head because it has to pay attention to the basic question "Where will the money come from?" Oh how wicked they must be, always thinking about management of their finances. And as for that word profit, how dare they reap the benefit of their long working hours or their innovative developments or their craftmanship, their trade or their service provision.

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Daye Tucker

Sep 09, 2012 at 12:13

It's not just this Westminster government that's daft David, the last one was just as daft. The UK is known in Europe as the most centralist Member State AND the most undemocratic!

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Geoff Downs

Sep 09, 2012 at 12:23

John r,

Can you explain in simple terms how the present policies are working? Are you saying for instance that the UK debt is seriously being tackled?

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Daye Tucker

Sep 09, 2012 at 12:29

John_r; What's lucky about having to endure a succession of Conservative governments that had no mandate in Scotland? What's lucky about having ALL your industrial bases wiped out in one fell swoop? Whats lucky about having your Territorial Sea Boundaries stolen by a parcel of rogues behind closed doors in Westminster in 1999? I could go on but I don't want to sound like a Scot Nat. "Where would the UK deficit be without the contributions from Scotland?" Take your blinkers off and read between the lines of the biased media. David Cameron knows very well, the reality of what it will cost the UK economy without Scotland and we're not just talking finance.

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Daye Tucker

Sep 09, 2012 at 12:34

.........and while you're at it John explain "FREE HAND OUT". That implies dependency and we all know what the opposite of that is.

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David Harvey

Sep 09, 2012 at 12:45

Sadly the private sectors infatuation with itself is not helping. For each public service job that is lost the private sector looses two. Why? because much of the private sector isn't really private sector. The truth is the private sector in this country is made up of a workforce working for other countries as assemblers etc. While the government gives tax breaks to their employers. The business people in many countries since the yuppy days have joined money from money brigade who are sapping the life blood out of this country instead of making products and employing people. While they claim the unemployed, disabled and old are the ones doing it.

More and more people are beginning to see that all this is leading us down the poverty toilet. We give away more than the total Greek national debt every year in tax breaks to companies that don't deserve it to keep them here while most of them are really here anyway with an office abroad.

There is no deficit just greed.

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Prof Eman

Sep 09, 2012 at 15:44

John-r

How about the government collecting the £6000/person off the richer people, with property assets of say £200,000 or more say, say linked to the Council Tax bill, e.g the top bands, spread over a number of years?

Would mainly hit those whose assets are appreciating such as in the London and SE, and help moderate the continuing housing boom in the area.

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Prof Eman

Sep 09, 2012 at 15:46

Daye Tucker

You forgot to mention that we are also the second most highly policed state in the world.

As things stand we all potential terrorists who need to have our communications recorded. This submission will be on my record.

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Geoff Downs

Sep 09, 2012 at 15:53

Prof Eman,

People can be property rich and cash poor. A better idea may be to get the money from the politicians and bankers who have perhaps helped cause some of these problems in the first place.

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David Harvey

Sep 09, 2012 at 15:54

Sorry Daye Tucker, yes you are right. And the replacement looks like more of the Etonian old boys club old money group in my view. They think poor people are those that went to Harrow.

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BOB 2

Sep 10, 2012 at 10:45

can someone explain to the me who we actually owe this £6000 each to or £150 billion in total, is it the world bank? how did we manage to get our selves into this mess,i think by having incompetent people ,in the wrong job running the country,as my old grandma used to say common sense that is whats needed and a lot of these so called experts don't have it.we have lots of

people in the country ,who have been very successful with money

these are the people we want running the country money policies

i am no expert as you can see , as for savings, yes us old buggers who have

worked hard and saved a bit for our retirement ,are now having to pay for the

incompetent idiots who got us into this mess.

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john_r

Sep 10, 2012 at 18:16

@Prof Eman / Geoff Downs

If only it was as simple as a one off payment to fix the problem.

In fact the £150Billion debt I am talkiing about is the extra debt taken on each year. Otherwise called deficit. So your suggestion would mean an impossible £6000 hit every year (and rising each year) on 20 million middle income families.

So even increased taxes won't solve it - the only way out is reduce spending to stop the debt increasing. It also seems that a large part of our borrowing is from overseas and we are at risk of the tap being turned off if we look like turning back. If this were to happen we will be sitting in the same boat as Greece.

Work in Progress: its difficult to find hard data but it seems £150 Billion extra debt last year will be followed by £122 billion extra debt this year - the increase is reducing year on year ( the accumulated total debt seems to be around £1Trillion so far). So austerity is here for quite a long time yet.

If anyone can remember previous recessions then this is going to be at least 50 times worse. There is one glimmer of hope in that I read recently that employment is gradually improving in the UK. With Europe tightening and buying less it is going to be hard keeping it that way.

Seems that the western world is in big big trouble.

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Prof Eman

Sep 10, 2012 at 19:26

Geoff Downs

Indeed people can be property rich and cash poor, but this is more of an exception than the rule. And further are you suggesting that someone with say over £300,000 in property cannot find £6,000?

In any case, one could make an exception for the poor amongst the property rich.

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Geoff Downs

Sep 10, 2012 at 20:06

Prof Eman,

Maybe it is unusual but there could be significant numbers in view of the boom in property prices. On the debt issue though, as I have said before, the Government options are limited. If they for instance go for tax increases as you suggest it would be £6000 less per year these families would potentially spend in the wider economy. Do you believe when our politicians raise tax they would use the money wisely or even to pay down debt. They are mainly driven by what gets them elected. Lower taxation in my view is the spur to economic growth whereas money in the hands of politicians is what got us into this mess in the first place.

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Prof Eman

Sep 11, 2012 at 00:18

Geoff Downs

...it would be £6000 less per year these families would potentially spend...

The assumption is that they would spend it in the UK, or at all. As such your statement needs to be modified for propensity to spend the £6000 in the UK,and not on foreign holidays for example, or held offshore.

I am not suggesting that the politicians would spend it wisely, but the impact could be less pressure to cut, e.g public sector staff, many of whom are frightened to spend, and also on the poorer side of the population, who normally have a higher propensity to spend within the UK, than the richer end. This would help maintain aggregate demand and have a net Keynesian effect.

Overall, deficit could be cut and a net Keynesian Demand effect achieved, as well as a redistribution of income of sorts.

We are heavily taxed by central Government on petrol, cigarettes, etc, why not some taxation on the more expensive end of property?

The richer end have had a 5% cut in the tax rate. Has this achieved anything ? NO. Lower taxation is not a miraculous cure on its own.

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Prof Eman

Sep 11, 2012 at 10:41

Geoff Downs

The tax could be tapered, starting at £1000, going up to say £10,000 for the most expensive properties.

It could be a one off, to help us on the road to recovery.

It would tax the foreigners who parked their money in the UK property market, particularly the appreciating asset end, whose net contribution to UK tax is often very little if anything.

It would be unavoidable, and not subject to accountants get outs.

Simple to collect via Council Tax.

I think there is a lot to be said for it.

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Geoff Downs

Sep 11, 2012 at 13:41

I guess tax increases are inevitable because of the massive debt mountain we have. Council tax is already an unfair tax because it takes no account of people's earnings. Tampering with it based on home values seems to me to be adding to that unfairness. VAT as well is an unfair tax because it hurts lower paid people who spend a higher proportion of their earnings. As a general rule low tax economies do better than high tax ones and so raising taxes in my view will further dampen people's spending powers. If you look at Government spending including mandated Government spending it needs to be brought down. How you do that whilst trying to create some growth and jobs is of course the question no one has yet got the answer to.

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dd

Sep 12, 2012 at 10:18

A focus on productive jobs rather than the box ticking jobs would be a step in the right direction.

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Prof Eman

Sep 13, 2012 at 10:47

Geoff Downs

Your comments on Council Tax and VAT, relate to unfairness and regressive taxation.

However what I am suggesting is a scale increasing from £0 to £10,000, depending on the Council Tax band the property is in.

The fact is that asset owning persons have come out best, under QE (Quantitative Easing) even according to the B of E own report, so as such contribution from them could not be seen as unfair. Remember we are all in it together.

Secondly as contributions would increase according to the value of their properties the tax would be progressive.

Finally the tax would be on residential property only, to avoid upsetting any business which was struggling.

No European country in difficulties at the moment has managed not to increasing taxation. Are we a special case?

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Tony Peterson

Sep 13, 2012 at 12:16

Prof Eman

And what would your proposals do to house prices,for the preservation of which the BoE has dished out so much pain?

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Geoff Downs

Sep 13, 2012 at 13:23

Prof Eman,

I hope we agree that easy credit and personal and Government debt has fuelled this problem over many years. Households and Governments are now beginning to try and reduce their overall debt levels. This has to mean a contraction in the economy and in my view lead to eventual deflation. I cannot see how increasing any form of taxation will help the economy but in fact will lead to a reduction in people's spending powers. In effect we are in a mess and there is no apparent or easy answers.

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DirtyHarry

Sep 13, 2012 at 15:35

I guess any pensioner light in cash but heavy in index linked government pension payments would be rubbing their hands together as QE will hardly affect them at all until it feeds into higher import costs and inflation. But then as inflation goes up so does their pension - Win - Win.

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Prof Eman

Sep 13, 2012 at 19:44

Tony Patterson.

As the extra tax to pay would increase from 0 at the bottom end to maximum at the top end. Little if any effect on first time buyers who are trying to get onto the property ladder at the bottom end. Rising in effect, reducing prices mostly at the top end.Since the top end are overpriced, just a correction i.e. bringing them back to reality.

Is it the function of the BoE to support top end prices?

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Prof Eman

Sep 13, 2012 at 19:48

Geoff Downs

You are right there are no easy answers, but let us hope we can avoid deflation. The story of Japan is not a happy one.

With appropriate policies the worst we fear can be avoided. I have made suggestions to this end.

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Prof Eman

Sep 13, 2012 at 19:51

Dirty Harry

You should be aware that there are two measures on inflation, and that the measly State pensions are now linked to the lower one, as opposed to the higher one as before.

There are no winners there.

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john_r

Sep 14, 2012 at 01:21

Prof Eman

I think Geoff Downs has provided a good summary of the UK financial situation. But I'm sorry I find it hard to see any value in your suggestions. You are proposing to tax middle income properties an average of £6K per year. That would have the same monetary effect as increasing peoples mortgages by an average of £120K (at say 5% mortgage rate).

All I can see from this action is more unemployment as families opt out of the new burden, banks reeling under more property default and the already ailing house building industry finally wiped out.

Perhaps Britain's biggest weapon in the fight for recovery is the floating pound which at current levels has the effect of making British exports appear competitive again. Only by increasing our exports (manufacturing or financial services or external support services) can we afford to pay for more jobs and more investment. So perhaps the Coalition have done well in keeping the pound weak while pushing to breakdown the obstacles to growth of the smaller private companies. Its going to be a long road back but as the chinese proverb say's 'the first steps are the most important'.

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Prof Eman

Sep 14, 2012 at 09:07

john-r

Thank you for your contribution which is well thought out.

However I do not fully agree with you that the Coalition have done well. I believe that the rate of change which they are implementing, e.g on the public sector, is too fast. The rate of change suggested by Alastair Darling was nearer to the one sustainable, whilst giving growth. The Coalition are digging their own recessionary grave.

My suggestion is to try and avoid this recessionary grave.

My suggestions are progressive, so they hit the poorer end the least whist hitting the richest properties the most, i.e according to their means.

There could be some exceptions for the cash poor and asset rich, like poor pensioners for example.

There would be zero burden at the poorer end, but full burden on the asset rich such as for example properties on say over £500,000.

The current problem is largely identified as first time buying, no effect on them mainly as they are at the bottom end.

As such I see no reason why the ailing house building industry should be wiped out. In fact it could help the building trade at the top end. Prices could fall, and become more affordable, thus helping to move markets.

Finally we have had some of the lowest mortgage rates ever, and some increase in them should be on the cards. They cannot stay at current rates for ever.

There is also a saying 'it is not what you do , but how you do it.'

In the case of my suggestion above the 'how you do it', should be changed to 'how you use it.' If the money was put to good use as suggested, for example reduction in VAT rate on all matters relating to construction, there would be a net growth effect in construction and otherwise, and the current recessionary spiral would recede.

.

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DirtyHarry

Sep 14, 2012 at 09:11

If there is a suggestion that property can be taxed to fill coffers and reduce debt I would suggest two actions

1. Increase stamp duty and make it apply to all property values then allow tax paying individuals a tax rebate on their paid stamp duty equivalent to that paid on an average value house - available every 5 years. That way first time buyers are not affected but property speculators and landlords will have to pay.

2. Review council tax levels and application of full council tax on empty or derelict houses. This should stimulate action to bring these properties back onto the market. Too many new flats are currently held on banks recovered assets and under utilised.

Most of all the measures should not hit average to low earning people as their confidence to spend their money in the system is essential to recovery of the economy.

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Prof Eman

Sep 14, 2012 at 09:12

john-r

The Council tax system has exemption, the same could apply to this new property tax. Fair and simple.

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Prof Eman

Sep 14, 2012 at 09:29

john-r

The other point is, that perhaps the suggested mean of £6,000, could possibly be lower, one that is appropriate to fund the stimulus, say in construction, that is required. Figures would need to be worked out, as to the most appropriate level.

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Prof Eman

Sep 14, 2012 at 09:35

Dirty Harry

A combination of your and my ideas could be the answer.

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Geoff Downs

Sep 14, 2012 at 09:53

Look there are two basic arguments going on in the economic world today. Those who favour cuts and probably increased taxes, and those who wish for further stimulus. My point is that both arguments are unlikely to work. Tax increases and austerity risk the potential for a severe depression and stimulus and potentially more debt risk economic collapse. A small state and thriving private sector is where we want to be, but we are a million miles from that. Raising taxes, in whatever form, continues the policy of big government and waste. The problems of debt in the western world, including particularly the USA are not seriously being tackled. There are two reasons for that, firstly the belief that debt can continue to expand without serious consequences and secondly because there is a lack real solutions on how to reduce it.

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DirtyHarry

Sep 14, 2012 at 11:09

The Germans managed to deal with this when they went through re-unification and this meant they had a decade of very flat economics and people accepting austerity and not merely dipping into the pot when they wanted a treat.

Management of expectations is what we are going though and the wests arrogance in borrowing money without compunction to stimulate the economy is unsustainable and will ultimately enslave us or bring us to war with our creditors.

Germany borrowed money during its re-unification but spent wisely on stimulating a physical economy and infrastructure. The UK and Greece by contrast threw it into schemes to keep politicians in power and fuel their cronies lifestyles and particularly in the UK allowed it to feed into financial services to the detriment of other industries.

As far as the US is concerned it is big enough to internalise and protect its way out of any excessive debt and currently its true total debt per taxpaying worker is much lower than the UK's

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Geoff Downs

Sep 14, 2012 at 11:24

Dirty Harry,

It is true to say that the USA debt is no worse, and in some cases not as bad, as other western countries. The issue though is that US debt has fuelled the world economy for years including the massive growth in China. Whatever the US does about debt it certainly can't keep growing and at some point probably has to reduce. If debt exceeds growth in an economy there is a severe problem. On the basis US debt and easy credit will be reigned in, the world economy will shrink. You talk of managing expectations as though it is just a shift in language used. I think you will find when the reality of the economic situation starts to bite it will be much more severe and not dealt with by the management of expectations.

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Prof Eman

Sep 14, 2012 at 11:26

Geoff Downs

Aspects of the two schools of austerity/Cuts/Increased taxes v Stimulus very aptly put.

However, that is not the full story.

Ideally we should be cutting on a high not, low, and giving stimulus when on a low as now.

However this has not happened, and this is the problem.

Administering austerity in a recession has disasterous consequences as in Greece, and I for one do not want to go down that route.

So what remains is to tweek the economy, so as not to go down the spiralling depression route, whilst repositioning the economy in steps.

However the speed at which one does this is crucial, too much cutting in a fragile economy gives depression, too little gives a balooning debt and deficit problem.

It is a very fine balancing act.

However the latest problem is lack of construction and this should be dealt with on an urgent basis, on a stimulus basis.

Full marks to the Coalition on their proposed relaxation of Planning applications regulations i.e. increased permitted development. But this in itself is unlikely to resolve the deep seated construction problem.

So one needs to cause an immediate stimulus in construction with my and other suggested ideas for so doing, whilst preventing a balooning debt/deficit problem.

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Scottino

Sep 14, 2012 at 11:40

Everybody seems to stray off the original subject matter. No on commenst on the pensioners anymore.

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Geoff Downs

Sep 14, 2012 at 11:48

Prof Eman,

There is a lot of truth in what you say but this is the issue I think. Keynes certainly recommended stimulus when times were bad so you would think he would mean now. He also suggested cutting back stimulus when times were good and in effect saving for a rainy day. Politicians though are highly unlikely to do that and face the being unpopular with voters. In other words are leaders should have been dampening down in times of boom., which they clearly were not. The problem now is credit and debt cannot be allowed to expand and therefore stimulus and further debt expansion could result in a economic collapse. It is therefore almost impossible to get the solutions with either austerity or stimulus. You are right to call it a fine balancing act, but even that may prove to be an under statement.

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Geoff Downs

Sep 14, 2012 at 11:55

Scottino,

You are right. It almost certainly has hurt pensioners and others. The main beneficiaries have been investors in the stock market. My guess is though that the Federal Reserve know their policies are not reaching the ordinary economy and the day of reckoning with equities is not far off.

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Prof Eman

Sep 14, 2012 at 13:11

Scottino

I think the comments made are very relevant to pensioners.

A contracting economy based on continuing recession, will affect pensioners rather differently that under a growing economy.

They have had to take a number of hits, and this could continue.

Many Governments are looking at cutting the pensions 'expense.' The more healthy the economy, the less sacrifices they will have to make.

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Prof Eman

Sep 14, 2012 at 21:58

Just to add to my post at 11.26, on construction-

BBC News business to-day, "UK construction activity shrank by 10% in a year." i.e till July.

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Prof Eman

Sep 15, 2012 at 09:49

Just one more point.

Any reason why the asset rich should not take a hit for a change, as opposed to pensioners?

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Geoff Downs

Sep 15, 2012 at 11:46

Prof Eman,

A mansion tax at the very top end of property values say over 1 million maybe. Hitting people on property over £250k I think would be a way of further reducing economic growth. A family buy a house at £100k some years ago. and because of the credit boom it rises to £300k, fuelled by Government action. Now you are saying to them by the way your property has risen so we want a further tax from you. Complicated and in many ways unfair.

Please let us tax people on income and only assets on the super rich.

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Prof Eman

Sep 15, 2012 at 13:05

Geoff Downs

On the basis of the fact that the Conservative element in Government would resist a mansion tax, a progressive property tax might be more acceptable, based on "we are all in it together." It could be tweeked to hurt the super rich much more, once the idea is floated.

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Prof Eman

Sep 18, 2012 at 11:27

Dear all

A couple of to-day's articles are worth looking at, to do with our discussion.

BBC News Politics-government eyes end to benefits and inflation link- by Allegra Stratton. Precisely the wrong move in the current recessionary climate.

A Property tax would be much better.

BBC News US & Canada-Mitt Romney secret video reveals views on Obama voters. Contains interesting facts and figures on US taxation, indicating that lower levels of taxation are not in themselves an answer to economic woes in the recessionary climate.

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Chris Powell

Sep 18, 2012 at 12:14

using the BBC for any facts on economics is miss-guided. They are the most socialist organisation in the world and never give a true picture. This is because they are in the public sector and want to promote their own worth!

The financial times, economist and Boomberg are far more rounded!

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Prof Eman

Sep 18, 2012 at 12:31

Chris Powell

I beg to differ with your views on this occasion.

The first article is about the cuts debate at the bottom end, which has been ongoing for some time.

The second is about the USA, and the facts come from the US Tax Policy Center.

You appear to be drawings conclusions before reading the articles or alternatively prefer to have a rather blinkered approach which is that anything published by the BBC has only biased value.

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Prof Eman

Sep 18, 2012 at 17:54

Dear all

I did not tell you that I had an invitation to attend a Nick Clegg Q & A session in Nottingham c/o Charles Walker of Nottingham Post group on Thursday last the 13th.

However, I was not selected to ask my question, relating to Property tax and matters relating.

I have now sent in my question to Nick Clegg, copies George Osborne, Vince Cable and Charles Walker. Hope to get some answers soon.

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Prof Eman

Sep 19, 2012 at 12:09

Dear all

On the Property Tax, I suggest a name of PVT-Property Value Tax, which used wisely would do the following-

1. Give councils say 10-15% of the funds collected to help them with their finances

2. Pay for reduction in VAT in construction

3. To provide direct Govt grants on investment in for example engineering/ manufacturing

3. Reduce/delay some of the cuts at the lower end.

4. Any balance left over could be used for other uses like reducing our deficit, thus helping us retain our AAA rating.

Net effect - Stimulus particularly on construction and thus to improve GDP, more confidence, fewer cuts, improved aggregate demand based on higher propensity to spend, help to move out of recession.

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Prof Eman

Sep 19, 2012 at 12:18

Addendum

whilst rebalancing the economy.

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Geoff Downs

Sep 19, 2012 at 12:28

Prof Eman,

I can now see you are very serious and committed to this property tax so I think it's now time to take the gloves off. A further tax on householders in the form that you describe is in my view is out of the question. The Government has frozen council tax for a couple of years because they know it was beginning to become a problem for hard hit households. The council tax is on of the most unfair taxes because it does not take into account income. The effect on pensioners would be massive. I'm not sure why you are pushing this tax so strongly and of course I'm not aware of your background. I am aware that hard policies will be needed to deal with the debt problems but this idea in my view is deeply flawed. It is also my view that you don't have much support on here for them.

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DirtyHarry

Sep 19, 2012 at 12:29

Unfortunately this does smack of kicking the dog when its already dead. Most property users are already financially stretched and geared up on bank loans. To businesses this would be indiscriminate irrespective of how well they are doing.

A vast collection of valuers and tax collectors would want their cut from this initiative.

One of the worst taxes for high street business is already in place in the name of Commercial rates which is a very blunt tax and is almost singledandely responsible for turning most small towns retail offers into a collection of charity shops - to the detriment of tax generating busines and enterprise. As with some rent deals rates should be based on a fixed charge element and a turnover/profit element rather than councils collecting the rates irrespective of how crap they are at town centre promotion.

How about a 0.5% tax on all spread bets and derivatives. Or is the City 'Holy Cow' going to keel over with such a measure?

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Prof Eman

Sep 19, 2012 at 13:22

Geoff Downs

Thank you for your well reasoned contribution.

However, I would like tom point out out that the Government is running out of time and money, so if this tax can reverse our downward slide into recession and further cuts as in Greece for example, I think it would be worthwhile. Remember there are no easy solutions. Solutions we are looking for are those that will work for the least pain, and I suggest this is one of them. if you disagree what other tax do you suggest?

As regards unfairness and pensioners the tax is progressive and would affect the top properties the most and the lowest value ones least, if at all. Secondly it would be subject to the same or even increased exemptions or relieves as Council Tax.

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Prof Eman

Sep 19, 2012 at 14:06

Dirty Harry

Thank you for your contribution.

But you seem to have missed a couple of points made earlier.

The proposal is to tax residential properties only. Not business. Nothing to do with commercial rates.

As to valuers and Tax collectors, no valuers required, existing Council Tax band valuations would stand. As regards tax collectors, they would be the Councils who would get a cut of the action as suggested.

I hope that clarifies matters.

As regards taxes on the financial services sector, they are being widely resisted by a combination of Boris Johnson and Dave Cameron, not by me.

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Prof Eman

Sep 19, 2012 at 14:46

Geoff Downs

A small addendum

On Council Tax freeze and lowest mortgage rates ever, the winners have been the people with mortgages, and losers the savers. Some correction might not go amiss. Perhaps those with mortgages could make more of a contribution to our economy? Or is that not fair?

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Prof Eman

Sep 19, 2012 at 16:46

Geoff Downs

I have to qualify my answers by stating that I do feel a need to allow for individual circumstances like parents with children in school. Kids cost a lot of money and I would hope that such circumstances would lead to some exemption.

At the simple end that could be x% off/child, or some other system.

However that would have the disadvantage of promoting larger families?

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john_r

Sep 19, 2012 at 16:51

Prof Eman

I am confident you will not be getting any support from Clegg.

He is a politician not a highwayman and to be frank your suggestions, to tax middle income earners on everything they have worked hard for is not progressive but downright highway robbery.

Doubt whether Ed Milliband will help either as he recently proclaimed ''being rich is good providing you've worked hard for it''.

You could of course try Dennis Skinner.

Council tax is to pay for local amenities and services at a rate commensurate with how much of those services you are expected to use.

Local and national expenditure has to be pared back and we need to live with or get around the consequences. For a country borrowing £3B a week as is the UK then spending very clearly has to reduce not increase.

For me Defence, NHS, education and welfare are all ripe candidates for cost paring and it seems only the former has been tackled so far.

If you really want to take a token swipe at successful business people then please keep it simple, say impose an extra income tax on anyone earning above the prime ministers salary. That would focus the chancellors mind.

But for the state to impose a claim on the citizens hard earned assets to me smacks of communism. A very definite 'No thank you'.

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Geoff Downs

Sep 19, 2012 at 17:46

Prof Eman,

Firstly I agree with John r. The problem is debt and how to reduce Government spending including mandated spending whilst trying to ensure the economy doesn't nose dive. Increasing taxes hits ordinary people, especially your type of property taxes. People are in general trying to reduce debt and continue to spend what is left. If you clobber them with more tax you will reduce economic activity further. The politicians have a difficult task and you suspect for electoral reasons they may wish to avoid the hard decisions for as long as they can. I also reiterate my view that council tax is a deeply unfair tax.

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Prof Eman

Sep 19, 2012 at 18:23

john-r and Geoff downs

Thank you for your latest contributions.

Have come across two interesting articles to-day-

BBC News Business. Zero hours contracts for NHS staff explained.

Talk about creating uncertainty in the NHS to say the least. Perhaps this is the sort of thing you favour?

BBC News business. Business bank will need £40b to work, says think tank.

So where is the money for it coming from?

Some hard decisions are required but not affecting x or y or z etc.

I reiterate again that PVT is not a Council Tax as such, but a Govt tax which can use the Council tax mechanism to collect the money. Which could be implemented for as long as necessary.

Now properties have been going up more than inflation for many years so giving up a fraction of the gains in PVT form in the current climate does not seem like communism to me, just taxation.

I am not attempting to take a swipe at successful business people, but do expect them to pay their fair share into the UK pot. After all it is the one that has made most of them rich.

As to taxing people above the PM's salary, that is progressive taxation, I have no problem with that. In fact my suggestion of taxing people with rich assets more than in the lower bands is exactly the same concept-progressive taxation.

Now if you want to go down the Greece route of more zero hours contracts and more austerity, all of us will end up worse of, with less middle income classes included and all.

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Chris Powell

Sep 19, 2012 at 19:15

The only time you can increase the public sector first is to throw money at an economy to stop a depression but like in 2008 it can just have the effect of causing a sovereign debt crisis like we have now in EUROPE. The economy would be shrinking at this stage as well.

Thankfully, the government is not mad and will not implement such a stupid middle England wealth tax.

I can understand people not being bothered if the bankers leave with their high bonuses but this will say to everyone do well and we will tax you do nothing and we will give you benefits (that is Greece). The argument coming from a supposed professor just shows how bad higher education as become.

Yes, it would be good if we could spend more on infrastructure every economist agrees with that. The argument is who pays for it!

Middle England, the low paid full time workers, and business all pay too much tax.

We have limitations on how much more we can borrow and we should not use QE to spend money on infrastructure like some daft Professor said on Question Time 6 months ago.

So there are no easy answers and we will all have different ideas, however silly they might be. I think we should cut spending more and get even harder on welfare and defence.

I also think we should raise VAT by 2.5%/5% (will raise between 12 and 24 billion) and use all the money to cut corporation tax (this will encourage companies to come to Britain and help are exporters more profitable to take on the importers), NI for employers making it cheaper for companies to increase employee numbers and for well thought out infrastructure projects.

It will hit spenders but considering, it will tax money spent on imports that we raise very little tax on (I phones, BMW, etc) but not food or children’s cloths. Ebay, Apple, BMW, Amazon will all have to and or should pay more tax in VAT receipts because they do not pay income tax to the UK Revenue. The UK companies who suffer on one hand with the VAT increase will benefit through lower corporation tax and NI.

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Prof Eman

Sep 20, 2012 at 00:04

Chris Powell

"Middle England, the low paid full time workers,and business all pay too much tax."

Had a look at some international comparisons of tax rates between-

UK and Germany

Income Tax Corporate 20% 30-33%

Income Tax Individual 0-45% 14-45%

Social Security Employer 13.8% 19.7%

social Security Employee 12% 20.6%

VAT 20% 19%

the table stated it is part updated and might not be exactly accurate, but generally speaking Germany has higher taxation.

Please show me the correlation between lower taxation and better economic management.

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Chris Powell

Sep 20, 2012 at 09:04

So you're saying if every one in world had the same tax sytem in the world we would all work like the Germans, spend like the Germans, save like the Germans.

Prof I have news for you we are not German or did you not realise what happend in world war 2.

We are a nation of spenders and Japan are a nation of savers. Yes, we need to educate but we also need supply side economics. Since labour came to power we have not had one month of positive trade with the world. Last year we imported £100 billion more goods (exluding services such as banking and insurance) than we exported. We spend too much and do not produce enough that is are main problem. So I say lower the tax for our companies making them have higher margins (to invest to improve and grow) to compete with the imports and increase the cost of spending so that we do not import so much on goods no one in this country makes any money on other than the sales man.

For every German there is a country like Hong kong who have very low tax. Once again your research is poor a bit like the BBC don't tell the whole story!

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Prof Eman

Sep 20, 2012 at 09:56

Chris Powell

Thank you for your latest contribution.

You criticise my research, but all I did was to give you an example that taxation and good economic management do not correlate directly.

Secondly, I believe that comparison with Germany as a developed nation within Europe is more appropriate than a comparison with Hong Kong.

As regards World War 2 my father was in the forces and fought against the Germans, was lucky to survive, so I do know quite a bit about it.

By the way you are not related to Enoch?

.

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Chris Powell

Sep 20, 2012 at 10:18

No relation to Enoch.

But you cannot compare us to Germany because they are European. Germany is such a different country. Look at their home ownership rates, savings ratio, Unions who want their companies to be world leaders rather than wanting constent wage increases and people in general who have a desire to work quickly and efficiently.

The Germans spend on want they need and can afford we spend on what we desire and can't afford- big difference!

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DirtyHarry

Sep 20, 2012 at 11:33

History has taught the Germans a lesson about borrowing money they can't afford to pay back.

We are still in the clutches of the product and money pushers with the political classes taking their cut.

Its American style capitalism but with a thick carpet at the bottom funded by prudent taxpayers.

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Prof Eman

Sep 20, 2012 at 13:14

Dear all

Some very, very interesting comments. Will look through them carefully when I have a moment to spare.

Just letting you know that the full text of my letter to Nick Clegg can be found in

Beyond QE: Ways to kick start the economy on citywire.

Please comment as relevant.

Many thanks for your contributions to-date.

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David Harvey

Sep 21, 2012 at 09:53

Interesting remarks. I wonder if some comments from "The front line" as it were might add something. We have produced a great number of people who acquired their property in better times and now struggle to hang on to it penniless. I often go to the homes of qualifying clients who live in veritable mansions but still qualify for aid. These have been on the rise. There is also a force keeping them there called Care In the Community which has done away with most supported living and actually relies on people staying at home. Needless to say it can't keep up. Things like Council Tax seem to be trying to bleed a gatepost at times. Certainly anyone who did have anything to spare to help the economy, local or otherwise don't now.

If we continue to bleed everyone dry like this there will be nothing but tax going out of their income. Although it does make sense to tax people who, after being taxed still have some surplus income. Taxing anyone beyond that point who ever they are will at the end of the day be destructive to the country or local community. Alway leave people with just a little surplus income.

There are also some issues coming to light involving care for the elderly. For the last ten years PSW's in the care side have been picked away at until they have become much more efficient than the public at large realise. Recent handovers to the private sector have backfired because they can't make it pay and many areas are being handed back like hot potatoes. I can't say either that any of the privatised industries of old are better run or cheaper all in all than they were.

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Geoff Downs

Sep 21, 2012 at 10:15

David,

Some points you make seem ok. Some of the comments in the second paragraph though seem to contradict other points you make. You seem to suggest that if people have surplus income, tax it, but leave them with a bit over. Surely for an economy to prosper people need to have as much surplus income over as possible.

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David Harvey

Sep 21, 2012 at 10:51

I am sorry about that Geoff. I am trying to say that taxing people who already have nothing is not helpful. I certainly don't want people to be taxed until they "almost have nothing". We have huge swathes of the country now who have no surplus income at all, and it's growing rapidly while we think about other figures like unemployment which say only a part of the tale. The percentage of the country with no surplus income is growing, made that way to a great degree by taxation in it numerous guises. We need to tax in such a way that everyone has at least a small amount of surplus income. I still can't see anything but failure in austerity policies as they are. Money is circulating to and from government at times to the exclusion of the growth of the country.

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Prof Eman

Sep 21, 2012 at 11:20

David Harvey

You have made some very interesting points.

I note that in the USA some 47% pay no income tax.

If I were to amend my proposed PVT- so that the lower 50% of people in lower Council Tax bands did not pay anything under PVT, whilst the rest would be subject to the usual Council Tax exemptions, would PVT be more acceptable to you?

Please remember that the PVT would be progressive with the higher the Council Tax band, the higher the PVT rate, so as to ensure the likes of bankers and similar pay in their fair share.

Anyone else care to comment?

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Prof Eman

Sep 21, 2012 at 11:22

PVT=Property Value Tax

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Geoff Downs

Sep 21, 2012 at 11:36

Prof Eman,

Unless I have missed it the one question you have failed to answer is as follows: Council tax, property tax or whatever you want to call it is not linked to income. You could have a £300k house with £20k income. You could have a £100k house with £40k income. Maybe others disagree but until you deal with that question your arguments are weakened. Of course that is not my only objection to any more tax increases. Until Governments seriously tackle spending it would be a disaster to hurt taxpayers anymore.

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Chris Powell

Sep 21, 2012 at 11:42

Any type of wealth tax is totally out of order.

If one increases wealth through earned income- they should pay income tax and this should be at a fair rate but raises the most money without the rich leaving.

If one increases wealth through inheritance- then inheritance tax should be paid and any tax loopholes should be closed.

People (or the person gifting the wealth) who have or should have paid income tax and we should restrict double taxation.

We should not penalise people who save in cash, own or purchasing their first home by taxing their wealth.

People will have to sell their property or not want to buy due to the burden of PVT!

PVT will encourage more and more people to not save or leave the country it is socialism of the greatest order and I for one would protest against it.

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David Harvey

Sep 21, 2012 at 11:56

Well, I really think that the council tax or any similar tax on a property as such is a bit of flop. They are crippling people where they are retired or if the children have left home. My humble home has council tax that is now 4 times what my mortgage was. As more and more young people stay at home, unable to afford their own home they pay nothing for what they use. While people who are retired or cash poor through no fault of their own, have to downsize from a beloved family home to survive. The ill fated poll tax however unpalatable was at least a more level playing field.

One issue that might be resolved regarding property tax in what ever guise we apply it might be to make it easier to have it reduced. Maybe ( poorly thought out here ) if there are only 2 living in it then a cap on it regardless of it's value. That would help the Care in the Community system and take the pressure off of many elderly people to sell up or starve. How we could get it back from the users who currently don't pay I am nor sure. They are currently hard up and likely out of work as well.

I wish you clever financial people could see the world from my perspective, I feel sure it would change you and temper your ideas and produce different solutions from those offered. The zealous attack on all things public sector has done the elderly ( and others ) a great disservice stripped services to the bone and replacing them with nothing viable. Most of the high earners still have their jobs ( and pensions ) while the working end has been reduced to a part of a skeleton crew.

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Prof Eman

Sep 21, 2012 at 13:23

Geoff Downs

Council Tax is not linked to income.

In some respects it is the beauty of it. if it was linked to income clever accountants would find ways round it.

We already have problems on income tax and its avoidance through many movements like the "We are the 99%" and similar.

There are many people Green with envy about how little tax is paid by the rich and wealthy.

So a tax not linked to income is a sensible one providing that there are sensible exemptions operating. i.e One that cannot be avoided by the rich and wealthy.

I make no excuses about for this tax, providing it is sensibly administered and targets the rich and wealthy in the main, who pay little if any tax.

For example, say 50% of residential properties in lower bands could be made exempt from the tax altogether, it would be progressive, council tax exemption could apply etc.

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Geoff Downs

Sep 21, 2012 at 13:36

Prof Eman,

Much of our tax system is unfair. However I say to you that the council tax is one of the worst because it takes no account of income. You are going to hit numerous families who are not cash rich. I think your inability to admit this is either because you fail to see it or you are being highly uncaring for these groups of families. In my opinion it is potentially quite dangerous to spout tax policies UNLESS you are absolutely certain which people in our society you are likely to see affected most.

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john_r

Sep 21, 2012 at 13:49

I find myself agreeing with all of Chris Powell's points except the last.

( PVT is socialism of the greatest order?). I find it socialism of the worst kind, one based on envy. Spending other peoples money with no back up plan of how to pay it back is how we got to where we are today.

The journey is reminscent of the previous labour government of the late1970's who adopted a wealth taxation policy on the rich 'to make their pips squeak' . It didn't work , a bad economy got worse and a major negative impact I remember was the stimulation of the brain drain of young well educated workers to other countries. Our salvation that time came when finally the IMF stepped in to supervise the UK economic policy as a condition of another bailout, (just as we are seeing in Greece now?). Policies were steered away from wealth taxation and towards tight monetary controls which gradually had a positive impact before labour was finally voted out.

Ed Milliband looks to have learnt the lessons promoting 'its good to be rich if you work hard for it' - but Prof Eman seems to be flogging the same old dead horse.

Patently Vindictive Tax ( I'll call it PVT ) will solve nothing.

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DirtyHarry

Sep 21, 2012 at 13:52

Despite all of this pain that is being inflicted it would appear from todays news that government borrowing is continuing to increase at 25% above target.

A whole raft of initiatives have to be brought into effect but the coalition appears to be sitting on the fence and has been largely inneffectual despite all the cries of unfair cuts in the news.

The basic fact is that as a nation with total borrowings of 500% of GDP we are still wasting money by using it to maintain living standards rather than to make useful goods to replace the £billions worth of imports that we don't match on trade. What we don't match we have to borrow and leave for the next 2 generations to pay - if they are still here.

There is an issue of fairness to be considered but unfortunately the people that the initiatives must be targeted on are those with less ability to up sticks for somewhere sunnier.

I still find it incredible how the welfare system practically ignores wealth and dwells on income when considering who is most deserving.

Take the example of an early retired couple who live in their paid for £1.5 million house but declare a paltry £15k income. They will be supported by the government to send their children to university on full grants and fees waived - How stupid is that?

The welfare state was not set up to keep wealthy people in the manner to which they have become accustomed. Handouts should be means tested on income and wealth and stiff penalties applied for false declarations.

If wealthy people have a cash flow problem its not for the state to sort out but it could quite easily by providing a loan secured against the property.

Call me a cynic but havn't you noticed the increae in middle aged people who wander around town centres with a walking stick? Could this be something to do with justifying getting enhanced DLA and showing the world they are entitled?

As for maintaining low interst rates. This is is proving to be a nice handout to middle class families all over the country enabling them to max out their mortgages and maintain their lifestyle - subsidised by the general and often less well paid public. Maybe interest rates should be increased but tax breaks re-introduced to the benefit of those with small to average mortgages.

We are becoming a nation more seperated by employment prospects, income and opportunity. The trick for the government is to improve those employment prospects for UK benefit claimants not for EU all comers.

The retired generation is important but no more important than the unemployed teenagers generation. However one generation has the finance and buying power and the other has the ability and energy to pull this country out of the overly indebted position it is in. Its time to channel and focus those resources.

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Geoff Downs

Sep 21, 2012 at 13:57

John r,

Spot on. Remember though Prof Eman is not just suggesting a wealth tax but a tax on ordinary families.

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David Harvey

Sep 21, 2012 at 15:06

It seems an unfortunate thing to me that, at a time when we need true "think tank" thinking and free thought to get out of this awful bind, that we encumber great ideas with being left or right and so dismiss them.

Politicians seem the least able to make decisions simply because they are political. In the words of Will Rogers "It's a good thing we don't get all the government we pay for".

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Prof Eman

Sep 21, 2012 at 18:38

David Harvey

I do agree with you, this left right thinking is dangerous.

For example it can be argued that left wing policies under the last Labour administration were working, and right wing policies under this administration are not, as most recently evidenced by UK public sector borrowing hits record high of £14.4b- the biggest deficit for the month of August since records began.

Given the choice, some people would opt for left wing policies as some call them.

Overall, I do not believe there are any sacred cows we should not touch in our deteriorating situation, especially if they lead to L/T improvement.

As to hitting the average family, they have already been hit with wages not matching inflation, not to mention the increase in unemployment, and increase in part time employment.

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Prof Eman

Sep 21, 2012 at 19:22

And the difference between Left and Right wing is the speed of the cuts.

Cut too fast and you get it wrong and cut too slowly and you get it wrong.

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Prof Eman

Sep 21, 2012 at 20:51

Geoff Downs

"Spot on. Remember Prof Eman is not suggesting a wealth tax but a tax on ordinary families."

Top 50%, or similar, of households to be subject to PVT, with exemptions strikes me as hitting the wealthy more than the ordinary family. Perhaps you have not fully read my proposals in full.

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Prof Eman

Sep 21, 2012 at 20:55

DirtyHarry

"If wealthy people have a cash problem, it is not for the state to sort out , but it could quite easily be by providing a loan secured against property."

Can this not apply to PVT?

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Prof Eman

Sep 22, 2012 at 09:05

Dear all

At the top end the tax could be viewed as PGT - Property Gains Tax.

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DirtyHarry

Sep 24, 2012 at 09:19

Prof Eman

Land charges could be used as a means of collecting any PVT. However as I've mentioned before property values are not the only benefit the rich have had under Labour mis-management of the economy. There are numerous other windfalls that have occurred under Labour rule which should not be ignored. However I accept that a reduced capital gains allowance for owner occupiers could be applied quite easily but should not touch those on average property value.

To reduce the chance of the property value bubble occurring again future governments should review stamp duty levels and re-introduce development land tax when circumstances are right. The latter was a massive missed opportunity by Labour which could have cooled the property market in 2004 - 2008 and gained revenue at the same time.

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Geoff Downs

Sep 24, 2012 at 09:43

Dirty Harry,

The mis-management of the economy has been going on for many years before the last Labour Government although it certainly quickened under them. In my view it is inevitable property prices will fall significantly over the coming years without any help from Government. The fall in property prices is one of the main fears the politicians have because of the net effect on peoples wealth.

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Prof Eman

Sep 24, 2012 at 11:40

Dirty harry/Geoff Downs

There are many lessons to be learnt from the past.

However what we need to be considering is the "here and now" and how to get out of the mess we are in. Cuts alone will not solve the problem, so an increase in some taxation is in my opinion necessary, at least in the short term. The problem is which, and how and for whom?

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David Harvey

Sep 24, 2012 at 11:43

yes Dirty Harry but we have been slow to admit it. Until now the direction the economy took towards making money from money and the lame duck ideas has not been seen as a bad thing. It may have seemed a good idea at the time like retiring at 50 etc but it seems like the beginning of a chain letter that was doomed to cause this problem.

We need to see the faults so we don't continue to repeat them, and not just those of Gordon Brown.

We need to create scientific minds and make sure that potential isn't waisted by university fees.

We need to reward companies that are making products from the beginning and not just assemblers for other countries. We need to discourage the reliance we have in money from money. Too many companies take advantage of tax loopholes and then don't re-invest. We cannot afford to give away an amount the size of the Greek National debt every year to these companies.

We desperately need to stop impoverishing ourselves in the hope of becoming arms length assemblers for other countries and then giving away tax incentives.

I believe we are better than that and can still produce high tech goods that the world will pay for. There are big changes coming in the world new needs and new thinking. I cannot see how we can be ready for it the way we are going.

Reward the things that will get us out of this not the things that got us into it!.

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Tony Peterson

Sep 24, 2012 at 12:40

More taxation reduces consumption in the economy.

Just what we need??

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DirtyHarry

Sep 24, 2012 at 13:38

We have to move away from Gordon Brown style Ponzi economics of encouraging people to spend more than they are earning and into to more sustainable economics that does not pander to the consumerist lobby.

Property hasn't hit rock bottom yet and will take some time to do so. In the meantime the recovery that needs private funding from all over the world is delayed.

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David Harvey

Sep 26, 2012 at 16:33

Yes again but remember that it was Gordon Brown that said if we take too much out of the economy too quickly we would be in trouble. He went on about it repeatedly at every election debate. It is starting to look like he was right.

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Geoff Downs

Sep 26, 2012 at 17:09

David,

Can you tell us what cuts have been made and the actual savings in money terms?

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Chris Powell

Sep 26, 2012 at 17:40

Every socialist was saying what Gordon Brown said because he is one in disguised.

The facts are that if a country already has a high deficit like we do or and a high total debt like Japan any increasing spending will have a positive growth effect in year one and raise tax revenues. However, by year 3 the growth effect will have gone and the deficit will start increasing faster than if the spending was not done due to costs of servicing the extra debt and the fact that the total public debt has increased.

This is why Greece failed, whilst Japan over last 20 years has had low growth and Britain in the 70’s needed to go the IMF. The socialist idea that more spending increase growth, tax revenues and reduced total debt depends on how much debt you already have.

Other consideration are: whether a lower currency - can improve exports like it did in the 1930’s for Britain but it’s not done the trick this time round for us (in the 30’s France and USA tried not to let their currencies fall and we had import controls). Additionally, future net debt was no way has huge in the 30’s because we had no NHS, Public pension ... that are deemed to cripple us in the future.

The facts are QE is the only game in town and pensioners are no worse off but the rest of us will suffer until we die. The main reasons are that we do not save enough (too much debt), we have a bloated public sector, too large a future public sector pension deficit to service and we tax UK business too much.

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Geoff Downs

Sep 26, 2012 at 17:59

Chris,

I agree with a good deal of that. When you consider spending the mandated part is vital as well. By that I refer to the endless cost of regulation on both the private and public sector. This sort of regulation not only puts huge cost on business but involves significant cost to the taxpayer in the administration of it.

We really do live in a Quango culture.

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Chris Powell

Sep 26, 2012 at 18:11

Geoff I also agree with red tape costs-

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dd

Sep 26, 2012 at 19:23

I also agree with the cost of red tape admin. Mark Prisk has been cutting much of the red tape but as he says a lot of what he is cutting hasn't even hit us (or businesses) yet. It is what is coming down the track, having been put in place by previous gov't.

As for this extract (Chris Powell): "we have a bloated public sector, too large a future public sector pension deficit to service and we tax UK business too much.", I saw some interesting numbers recently. Public Sector pension liabilities are forecast to DOUBLE in only two years (CG Unfunded pension schemes, not Police nor fire service):

2010/11: £ 4.5bn

2011/12: £ 7.0bn

2012/13: £ 10 bn (forecast)

Budget 2012 doc.

Equiv for Police and fire go from £1.1bn to £1.6bn only, in the same two years.

.. all this thanks to "those generous chaps Tony and Gordon".

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Geoff Downs

Sep 26, 2012 at 19:33

dd,

Certainly thanks to Gordon and in fairness previous Governments. Of course that's what politicians do to win elections. Prof Eman, in particular, seems to believe politicians do what is best for the country.

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dd

Sep 26, 2012 at 19:35

forgot to mention:

and then Mr Clegg proposes a levy on pension pots of those whose "what you might get when you retire" shrinks annually, despite a perfectly reasonable rise in fund value.

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dd

Sep 26, 2012 at 20:14

Geoff, In relation to (though not a specific answer to) your question "Can you tell us what cuts have been made and the actual savings in money terms?":

I see that Public Sector Net Debt is forecast to increase to £1,479bn by 2016/17 from £905.3bn actual in 2010/11.

That's what happens when promises for the future are made by people who can't do sums.

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Geoff Downs

Sep 26, 2012 at 20:33

dd,

Thanks for the figures. In a sense I hear a lot of comments from politicians and the media that we are cutting to fast. David in his comment even suggested Gordon Brown was right. It was just that unemployment for instance is relatively stable and so I was trying to figure out if the cuts, so called, were causing the debt to get worse or was it in fact something else. Anyway perhaps David will have the answer but your figures are interesting.

Perhaps what I really mean is that are the Government simply kicking the can down the road?

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DirtyHarry

Sep 27, 2012 at 10:35

I think the government is attempting to change too much when the basis of our problem has been the economy. Attention and money has been diverted to schemes that could be argued are progressed through political dogma which will add to our deficit in the short term due to re-structuring costs. I believe this divertion of effort could increase the chance of the economy not being brought into line before the next election. By then the electorate may have forgotten the sins of New Labour.

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dd

Sep 27, 2012 at 12:56

What worries me is that cuts are appearing in front line services and are therefore very visible but those who are making the decisions on where cuts are to be made are not cutting themselves. They remain firmly in place.

A friend in the public service said that when voluntary redundancy was offered, there was a rush for the door by her best colleagues with longest service, due to the comfortable packages being offered.

I also fear that much of the spending increase forecast is due to the negotiations under Labour which improved the cs pension schemes and other arrangements for the future but did not have any impact at the time when the government which put it all in place was in power. They knew what they were doing and it was with political motive, not altruistic as they claim.

I am also concerned about a culture of entitlement which develops amongst those who have been given more (wherever) because they then begin to believe that they deserve it and do not take into consideration where the money comes from. If a private company is in difficulty, the workforce has to accept pay freezes, reductions, etc UNTIL the situation is fixed. They have no ultimate guarantor or source of funds such as the taxpayer to bail them out. Obviously this is more of a comment about private SMEs rather than the large corporates. When healthcare trusts have to face being in administration, why is the taxpayer paying pensions of £60,000pa to GPs? Because they have become "entitled". Result: reduction in nurses on the wards and they are not available to help a patient with a drink of water.

Promises have been made by politically motivated people who can't count.

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David Harvey

Sep 27, 2012 at 16:38

Geoff, hi,

I did not have those figures and have been wondering what my contribution could be here. I look at the very clever, financially technical arguments put on here and started to feel that what is a hands on ground level view doing here.

I remember in the 70's I was working in Egypt and president Sadat was in charge. I remember watching convoys of army trucks which, from high above would have been seen as just that. The fact was that at ground level I could see that only the front truck was working and pulling as many as 6 which were broken and often rolling on hubs without tires. They were surrounded by what were actually children in army uniforms rolled up so they could walk. Other arab nations saw this form the air and photographed it and estimates grew of Egypt's Apparently huge military.

This is what is happening with public services and what people who are not at ground level see . It is what we risk if we only look at figures.

First, the public service workforce has been under attack for the last 15 years and particularly the last ten. In relation to need it has gotten tighter each year. Due to this people like myself when I was in care were given only 3 month contracts, never knowing if we had a job next time. Many at working end of the stick have no pension because of it.

When layoffs occur they are mainly at the working or service manager level, so under 25,000pa. The people on huge salaries ( and therefore pensions ) seem to secure their's before redundancies are made. If not they contract in some high paid so called consultant to take up the slack.

The other thing which jumps out at me is the feeling that pensioners are no worse off that everyone else. That is from my perspective an astonishing remark. The lost of a fiver a week to some is a world away from the effect on the many millions including pensioners, who are now living hand to mouth ( working or not )

Also, the public sector has been a huge buying machine and many private companies survive on it. The public sector doesn't make tools, office equipment, ambulances, vans, cars, timber, screws and the massive amount of things it uses. Instead it is supplied by the ( so called ) private sector. The company I work for, works essentially for the government and when it squeezes us we have to cut back. We recently lost a woodwork shop in which were made, very cost effectively, some wooden components. So these will no longer be available to the needy. But it doesn't stop there, a few of our workers are now job hunting. But also the supplier of the wood are also effected as are the importers and so on. More private sector companies are hit that we know.

When we see figures about layoffs we must always remember that a large proportion of them will be over 55 and also specialists in one way or another. For each one of them perhaps two are lost in private companies The knock on effects of that make it hard for them to get work and we begin to see the growth of rundown communities that in some cases may never recover.

I am not a Brown supporter, I did not vote for him nor would I. I simply suggested that something he said may have some truth to it while looking from my perspective, down here! It's the easiest thing in the world to tell somebody something that they want to hear and so many want to hear that this is working.

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dd

Sep 27, 2012 at 17:05

I agree and it is important to differentiate as you do between those at the top of the tree and those at the other end.

For the solution, context is important. Labour's spend, spend, spend may be fine when there is gold in the vault, growth in the economy and a general positive outlook but when indebtedness is already so high, and all we can do (painfully) is increase the rate at which we reduce the annual requirement to borrow, that is a different matter. Both systems just could be right but in different contexts.

NB. Did a factory visit today. Very encouraging indeed. I thought they would be just distributors. Wrong. They manufacture, too. I thought they would be the subsidiary of the company in the US. Wrong. The company in the US is the sub. Returned feeling up-beat. It was good to see.

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Chris Powell

Sep 27, 2012 at 17:05

Private companies that just do work for the public sector are public companies and are part of the public sector.

You have 3/6 month 1 year, contracts in the public sector because you get moved around and hopefully because it might be easier to get rid of you if you’re no good.

I can't see why if someone employed in the public sector that can't do their job should be given their P45. I also, think that public sector workers should not get 6 months full pay sick leave because it encourages them to take sick leave! They say it is stress. However, the private sector takes far fewer sick days a year, have less holiday (some NHS staff get 35 days and teachers gets months), don’t all have a gold plated pension and can be sacked. Teachers should come in during school holidays and paint the school etc.

The public sector workers need to wake up and smell the coffee. W e cannot afford to pay them so much unless they start doing more for less!

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Geoff Downs

Sep 27, 2012 at 17:23

David,

Firstly I find your remarks about pensioners interesting and correct. Prof Eman hopefully will read them. He believes his property tax would not touch people who are cash poor because they do not live in the more expensive properties. I have news for him that many do and a further tax would hit them hard. Perhaps he believes such pensioners should downsize.

On the public sector. Surely everyone wants to see policemen out in the community, teachers in the classrooms, and doctors and nurses in the Health Service. This debate in my mind has never been about them. It is about overall Government spending, including mandated spending which needs at some point to be bought under control whilst leaving front line services unaffected.

Of course it is true what you say in your third paragraph about those private companies supplying goods to the public sector. It is true sadly that in any recession not only our jobs lost but whole companies can disappear for various reasons, never to return.

If only Governments could create lasting jobs and wealth these debates would not be needed. Sadly they can't and at the end of the day it is going to be the success of the private sector that is both key to employment and the health of the Public Services.

I think your comments are very good because it focuses peoples minds on the real issues on the ground such as unemployment etc.

Finally I would like to reiterate my view that our welfare and benefits system should be targeted on the people in real need and the Public Services should protect all front line staff. Sadly I suspect the politicians will take the easy options and where they encounter the least protest.

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dd

Sep 27, 2012 at 19:18

"Sadly I suspect the politicians will take the easy options and where they encounter the least protest."

Exactly. Unions = power; Action Groups = noise.

... but this does not mean that those in the action groups are less worthy.

Even so, to what extent can politicians control the behaviour of the civil service managers who, when asked to cut, cut the front line and retain all the privileges for themselves and their behind the scenes colleagues? Can politicians enforce cuts in specific areas within a department? Is it really justified to blame the politicians for this?

What the politicians could do is continue and intensify the cutting of red tape and remove at least some of the boxes to be ticked. That could halve the work of teachers, for example, with the result that they would not be tempted to ask for more money, which we don't have, to compensate for their long working hours!

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David Harvey

Sep 27, 2012 at 19:42

Chris I have worked in both sectors. I have worked as a carer in public service caring for people with profound and multiple learning difficulties and as an engineer in some of the most hard nosed environments you will find. I have worked with oilfield people that make the fictional JR look tame. My current work takes me in to the homes of around 12 people a day, all in crisis all needy some dying some barely living many have fought for their country or have lost someone who did, many let down by a service that is a shadow of what is needed, a pretence, made that way to satisfy austerity and the PSW hatred that is driven more by ignorance that fact. I know first hand how hard our front line psw's work.

Recently the bulk of care staff in my county were handed to a limited company. They are being quietly handed back because there is no money in it. Often it's the private sector that need to smell the coffee and maybe ask how Private sector they really are. I think your views ring of propaganda and not of real knowledge.

We cannot just let people die. Services must exist by law, and for all the ranting about PSW's paying for them through your taxes will be cheaper than paying the private sector to do it, and, when a chance of more profit shows itself you will pay through the nose.

Personally I don't feel that privatisation has been that wonderful. Look at the price of a rail ticket, a litre of water etc.

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David Harvey

Sep 27, 2012 at 19:58

Goeff the speed of change from what we have to what we need has been too fast. the private sector is not growing fast enough to take up the slack and I think it needs to be or change needs to slow to suit. We so badly need original manufacture here not assembly for Japan that we have to give away taxes for. It's not happening! we have some of the best inventive minds in the world and they have ideas. There are new technologies, new sciences needed and people have ideas but they are being stifled. Filter out the gifted and pay for their education have them pay it back in kind. Make companies pay their taxes and use the money to drive new original manufacture. If we just lay off hundreds of thousand of people onto a an already horrendous job market we end up paying them anyway.

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Geoff Downs

Sep 27, 2012 at 19:59

David,

You are right about privatisation. Prices from most of the privatised companies are high and climbing all the time. One of the reasons for that I believe is that regulation prevents competition and therefore they basically can charge you what they want. Again it shows us how regulation effects markets and in turn consumers.

It is also worth noting how many privatised companies are foreign owned.

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Geoff Downs

Sep 27, 2012 at 20:35

David,

You are right to say that cutting public services to quickly could be dangerous. I have said to Prof Eman that to my mind none of the old solutions will work.

You certainly cannot afford to create more debt, that would risk economic collapse.

The Government is attempting to switch debt from the state to citizens. You can see that taking place in Greece, Spain etc and the unrest it is causing.

We can all be sure of one thing there are no easy solutions. The reality is that the state has too much debt and so do the citizens. I cannot see a way round this and the years of easy credit and debt have finally caught up with us.

In my view, as I have said before, it could all be much worse than the 1930's.

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David Harvey

Sep 27, 2012 at 21:27

Geoff,

Yes it could. It's easy to see why business is so edgy. We have to get this right this time. The sad thing is that many good ideas are lost because it may have been thought of by a left wing or right wing person. Just because Gordon Brown did so much wrong seems to be enough to trigger a toggle in our minds that David Cameron is doing everything right. We need something more positive than austerity to focus ourselves. As a country we need to see positive things happen and that we are worth something in the world, because we are. Letting new ideas go abroad to be brought to fruition because of stuffy ways here must stop. We need to nurture and protect our engineers, scientists, inventors and true business people. They are our wealth now and they will make us something again. We have invested in poverty and it has to stop. Lets make some of the companies who enjoy some of our hugely generous tax loopholes pay for scholarships for gifted people that we need for our future or take away there tax loopholes.

Not to forget that if we do carry on like this there is no certainty that Cameron will get back in. and then what?

What an interesting and pleasant discussion this has been.

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Prof Eman

Sep 27, 2012 at 23:21

Hi

A number of you have made reference to comments and views I hold.

Please be so kind as to update yourselves in the article discussion - "Draghi's OMT: is this the big gun or big fudge?"

In particular on the section from Sept 24 at 18.11, and then comment as appropriate.

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Chris Powell

Sep 28, 2012 at 08:49

I wish people like you David (who must have limited knowledge on economics) would stop saying we are in ‘Austerity’ the size of debt will increase by 7% (you can count on one hand the number of countries who are doing that in the world- is every one saying that virtually every country is in austerity) and by the way David I have a PhD in Economics and my wife works in the NHS, so maybe it is you who lacks the knowledge.

My main thesis is if we try to increase the size of the cake for everyone over the long term and not just for a year or two like socialist Brown’s policies we will all be better off even the benefit cheats and there are so many that could work. When the public sector piece of the cake gets far too big like now then the long-term economic growth is reduced. We are not increasing the real economy. However, Geoff is right that we do need to keep the front line services but there is so much waste left over from the open cheque days of Brown and Blair.

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Prof Eman

Sep 28, 2012 at 10:27

Chris Powell

If you can find the time to look at my post of Sept 27 at 23.21, please do so and comment as appropriate.

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David Harvey

Sep 28, 2012 at 21:43

I do have limited knowledge of economics Chris and I just try to give my perspective. I do not say it to be a thorne in anyones side.

In what was my home town there used to be quality shops, now a third of them are empty, we have just one apartment store remaining and the rest are poundland and 99p stores etc, lots of charity shops which are the busiest, and also pawn shops which have sprung up everywhere. Unemployment grows every year and is showing no signs of stopping let alone improving. There are no opportunities for our young people. You can walk from one end to the other and not hear English spoken. An entire section that used to house well off people are divided into flatlets to house thousands of Portuguese and Eastern European people who can't speak English creating a ghetto like quarter. Our hospital is always in trouble for bad operations etc. I just had an op and the ageing equipment broke down leaving the anaesthetist to pump the breathing gear for hours by hand. The description could go on and on. More layoffs are due and it's set to get worse as the public sector sheds ever more staff and even more private sector are also hit. It may not seem austere from your perspective but from mine it does.

We are not keeping the front line services at all. Many important services are being replaced with telephone assessment systems that leave many without basic needs because of the way they function and the staff who with all credit to them have no proper training. It's the front line that we are loosing.

Anyway, by nature of your qualification, if you have used it wisely, we will see things from a different angle I suppose. I hope there is room for both of us here.

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dd

Sep 28, 2012 at 23:07

This is what makes me ask what is the justification for pensions (not salary) of £60,000 funded by the taxpayer when the situation is as bad as you describe. There aren't many "greedy" ex-bankers receiving anything like that amount. Public Sector pension liability is forecast to DOUBLE in only two years according to OBR. It is where the cuts are being made which is the problem, not the fact that there are cuts. Also frustrating is the fact that it is those who will be receiving such pensions who are doing the cutting of my hospital services locally.

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David Harvey

Sep 29, 2012 at 01:59

I know what you mean, when I was a carer, I used to wonder why people clever enough to raise there own pension where in on the ps pension in the first place.

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