Coronavirus and electrification

[Bald Rick]

The worry is that the economy is going to be in such a state that the Treasury will be calling all the shots

The Treasury has always called the shots!

 

[GRALISTAIR]

The Treasury has always called the shots!

But as the Prime Minister is First Lord of the Treasury, his voice and opinion and direction carry immense weight.

 

[duffield]

But as the Prime Minister is First Lord of the Treasury, his voice and opinion and direction carry immense weight.

And he effectively sacked his previous chancellor and installed a much more compliant one. The new chancellor will do as he's told.

If the economy isn't to languish for years with massive unemployment, a huge programme of public works will be essential, and will help to jump start the private sector. I'm no Boris fan, but I think he will realise this and take the (pretty eye-watering) borrowing hit; saying 'there is no money' and going back to austerity is not a realistic option in these unprecedented times and would almost certainly end up making the finances *worse* rather than *better*. Despite our less than stellar credit rating, interest rates are at rock bottom and will probably remain so indefinitely, so borrowing on this scale will be possible. I believe that infrastructure spending will be a very high priority with only the NHS outranking it.
Anyhow, that's just my opinion based on evidence like the HS2 go ahead.

 

[GRALISTAIR]

The advantage with infrastructure spending is it can benefit at least 4 generations and not just one.

 

[edwin_m]

The Conversation suggested a one-off tax on the top 50% by wealth as an alternative to many more years of austerity and/or a large national debt. I think I'd be willing to give a small percentage of my net worth to get the economy out of the hole it's currently digging itself into.

 

[GRALISTAIR]

The Conversation suggested a one-off tax on the top 50% by wealth as an alternative to many more years of austerity and/or a large national debt. I think I'd be willing to give a small percentage of my net worth to get the economy out of the hole it's currently digging itself into.

And it has to be screaming out for about 10pence per litre on fuel - diesel and petrol. With oil prices low at the moment the country should be able to take the hit. Would need an emergency budget of course. And surely Labour/opposition cant be against that as it would help the environment. I suggest on cigs and booze too.

Sorry we are drifting off topic. Though the bit about fuel duty is obviously not off topic. Less fuel burn should help breathing clean air.

 

[Bletchleyite]

The Conversation suggested a one-off tax on the top 50% by wealth as an alternative to many more years of austerity and/or a large national debt. I think I'd be willing to give a small percentage of my net worth to get the economy out of the hole it's currently digging itself into.

The trouble with that is that it depends on what "wealth" means. It could result in the need for people to take on big debt or sell their house if, for example, they had a large house which they had inherited.

I'd rather they just upped income tax, to be honest.

 

[HH]

The trouble with that is that it depends on what "wealth" means. It could result in the need for people to take on big debt or sell their house if, for example, they had a large house which they had inherited.

Is that necessarily a bad thing? It is for them, but for the country as a whole? It would certainly be the quickest way to pay for all the things we need to pay for.

However, I cannot see Boris signing up to it; it would cost the Johnsons a pretty penny.

Back to electricfication, I have to wonder whether HS2 might get dumped, despite the recent green light, to fund it?

 

[Bald Rick]

The trouble with that is that it depends on what "wealth" means. It could result in the need for people to take on big debt or sell their house if, for example, they had a large house which they had inherited.

I'd rather they just upped income tax, to be honest.

Agreed. If I was taxed on my net liquid assets, I’d be getting a hefty rebate!

 

[JonathanH]

Is that necessarily a bad thing? It is for them, but for the country as a whole? It would certainly be the quickest way to pay for all the things we need to pay for.

However, I cannot see Boris signing up to it; it would cost the Johnsons a pretty penny.

Back to electricfication, I have to wonder whether HS2 might get dumped, despite the recent green light, to fund it?

HS2 is paid for by future revenues - the annual borrowing it involves is in many ways not really that significant. Electrification of existing lines probably doesn't generate the same amount of future revenue.

A wealth tax certainly has attractions but I concede that it is difficult to assess and manage. Perhaps something like 2% on a primary residence, 5% on pension scheme assets and 20% on liquid assets. Payments could be met by extending the period of mortgages if people can't afford the immediate payment.

 

[Bletchleyite]

I see the benefits of wealth taxes, but a one off hit doesn't seem to me the right way to do it. We need higher general taxation anyway, so raise it and leave it raised once paid back.

Government debt isn't automatically bad, anyway - get some National Savings bonds out there!

 

[Bald Rick]

HS2 is paid for by future revenues - the annual borrowing it involves is in many ways not really that significant. Electrification of existing lines probably doesn't generate the same amount of future revenue.

A wealth tax certainly has attractions but I concede that it is difficult to assess and manage. Perhaps something like 2% on a primary residence, 5% on pension scheme assets and 20% on liquid assets. Payments could be met by extending the period of mortgages if people can't afford the immediate payment.

I’d have to sell my house to pay that. As would many others. Asset prices (property, stocks, bonds) would collapse, which ultimately affects pension funds. It’s not going to happen.

 

[37424]

Is that necessarily a bad thing? It is for them, but for the country as a whole? It would certainly be the quickest way to pay for all the things we need to pay for.

However, I cannot see Boris signing up to it; it would cost the Johnsons a pretty penny.

Back to electricfication, I have to wonder whether HS2 might get dumped, despite the recent green light, to fund it?

Well I think its a bit late to dump HS2 now it been given the go-ahead however whether such as phase 2b in particular see the light of day certainly in its current form and timescale remains to be seen.

Government will have a very difficult balancing between wanting to avoid austerity and the Tory right that wont want to raise taxes. Clearly there will have to some capitol spending but the railways and electrification are going to be competing with other forms of transport and other forms of infrastructure, which is why I think those looking for a mass electrification plan as originally envisaged in CP5 will be somewhat disappointed. I also think there is debate to be had in terms do we spend the money on improving the existing network with such as electrification or do we spend some of the money reopening old lines, many people on here seem to want both but I doubt there is going to be money for both to any great degree. My own view is that we should prioritise the existing Network, HS2/NPR, East-West link are enough to be getting on with for some time, and forget ideas like reopening the line to Fleetwood.

 

[Starmill]

Despite there being an uptick in interest and chatter, there was very little evidence of a return to prowess for electrification in the minds of the keyholders just prior to the onset of the crisis.

Clearly for now there are many other priorities, but it will be very interesting to see if the convincing argument is cutting through more when it comes to recovery spending. We will soon find out.

 

[Starmill]

I'd rather they just upped income tax, to be honest.

This rather relies on the idea that enough people have enough income to tax.

 

[Starmill]

I’d have to sell my house to pay that. As would many others. Asset prices (property, stocks, bonds) would collapse, which ultimately affects pension funds. It’s not going to happen.

It's definitely not going to happen, not with the current government, but a capital levy could be less destructive than the economy finding a new equilibrium at a much lower level of aggregate demand than it was at before the crisis. The way to think about it is this: a capital levy brings all the pain of years and years forward to a single point in time, and divides it out evenly. It also permits an overnight transformation from a high-tax economy to a low-tax one. There will also be people arguing to run inflation hot to cut debt, and that is more attractive than a capital levy, but insidious, slow, and grossly unfair by comparison.

The cost of market crashes such as you describe is financial and political, but the cost of economic depression is human.
Still, we are not there yet. The government still can, and should, spend its way out of the crisis.

 

[Bletchleyite]

It's definitely not going to happen, not with the current government, but a capital levy could be less destructive than the economy finding a new equilibrium at a much lower level of aggregate demand than it was at before the crisis. The way to think about it is this: a capital levy brings all the pain of years and years forward to a single point in time, and divides it out evenly. It also permits an overnight transformation from a high-tax economy to a low-tax one. There will also be people arguing to run inflation hot to cut debt, and that is more attractive than a capital levy, but insidious, slow, and grossly unfair by comparison.

The cost of market crashes such as you describe is financial and political, but the cost of economic depression is human.
Still, we are not there yet. The government still can, and should, spend its way out of the crisis.

Your other option is more quantitative easing, which effectively "taxes" people on the value of their wealth by making it less valuable. Also means no need to hit people with an actual bill.

 

[Bald Rick]

Despite there being an uptick in interest and chatter, there was very little evidence of a return to prowess for electrification in the minds of the keyholders just prior to the onset of the crisis.

Oh there definitely was more than chatter.

 

[reddragon]

The trouble with that is that it depends on what "wealth" means. It could result in the need for people to take on big debt or sell their house if, for example, they had a large house which they had inherited.

I'd rather they just upped income tax, to be honest.

Unfortunately, its the middle classes who pay tax, probably far too much on income tax. The problem is the super rich and big business who avoid taxes altogether, think Google, Amazon, Starbucks etc. They hold 99% of all wealth.

 

[Bletchleyite]

Unfortunately, its the middle classes who pay tax, probably far too much on income tax. The problem is the super rich and big business who avoid taxes altogether, think Google, Amazon, Starbucks etc. They hold 99% of all wealth.

They mostly hold it outside the UK, though, so a wealth tax won't hit them either.

 

[HH]

Your other option is more quantitative easing, which effectively "taxes" people on the value of their wealth by making it less valuable. Also means no need to hit people with an actual bill.

The trouble is that it also taxes income.

 

[Bletchleyite]

The trouble is that it also taxes income.

I don't see that as a trouble, rather a necessary evil.

 

[HH]

I don't see that as a trouble, rather a necessary evil.

It's a trouble because it hits the poorest the hardest.

 

[Starmill]

Your other option is more quantitative easing, which effectively "taxes" people on the value of their wealth by making it less valuable. Also means no need to hit people with an actual bill.

That's the same as running inflation high. Looser monetary policy would need to be a lot looser too, to have that effect. It is also quite difficult to halt when you've decided you've inflated your way out of your debts just enough.

 

[GRALISTAIR]

That's the same as running inflation high. Looser monetary policy would need to be a lot looser too, to have that effect. It is also quite difficult to halt when you've decided you've inflated your way out of your debts just enough.

While I do totally agree with you, it may come down to "which is the lesser of the two evils?" and I suggest that is inflation. However, I do think once again as stated upthread raising excise duty on gasoline, diesel, alcohol and tobacco are absolutely necessary.
Tobacco smoking - pre-existing condition higher risk of Covid and any mutations
Fuel duty - fuel causes pollution - highly suspected of being closely related to Covid deaths.
These taxes maybe more tolerable to a Tory government than income tax/wealth tax etc.

 

[Starmill]

While I do totally agree with you, it may come down to "which is the lesser of the two evils?" and I suggest that is inflation.

It is effective, and it may be necessary, but it is totally indescriminate and random in whom it hurts, compared to a capital levy, which can be very precise and targeted.

Significant increases in duties on certain luxury items and carbon intensive activities, plus anti-pollution taxes, are a total no-brainer, but that has nothing to do with coronavirus. If it were up to me there would be tax on aircraft fuel, VAT on domestic flights, a higher base level of fuel duty and Air Passenger Duty and annual uprating of CPI+1 on the duties. I would also look at an expansion of parking levies. These ideas are all well overdue. More explosive concepts can come later. Sadly none of this even comes close to paying for the cost of Covid-19.

 

[Bletchleyite]

Why not put a percentage levy on air fares instead? I've long not understood why more such levies aren't percentages as then you don't need the Government to get bad publicity for increasing them, as they would increase naturally. Same for fuel, cigarettes, alcohol etc.

 

[GRALISTAIR]

Sound idea. I like it. Higher % on internals such as MAN-LHR or LPL-LGW or MAN-ABZ etc. Definitely higher to/from LCY

 

[GRALISTAIR]

More evidence

Air pollution levels will bounce back as COVID-19 restrictions loosen, scientists say

Air pollution has drastically decreased around the world as people stay home during the COVID-19 pandemic. However, as lockdown restrictions loosen and regular activity resumes, studies are showing not only that emissions will return, but also that greenhouse gas levels continue to increase and global temperatures are still on the rise.

 

[Bletchleyite]

More evidence

Air pollution levels will bounce back as COVID-19 restrictions loosen, scientists say

Presumably their next interview will be with regard to the religious persuasion of a certain inhabitant of the Vatican, followed by the lavatorial habits of ursine creatures?