Paying back the cost of Covid-19

[Qwerty133]

Yes the triple lock froze pension rates to lnflation plus’s 1% but major bills went up by much larger rates 10 to 20% or so Energy Insurance Train Fares to to quote a few. That is how pension rises are gobbled up and we are left as one of the poorest in Europe.There are many poor & rich pensioners same as poor & rich workers, the workers can find a better paid job, us poor pensioners don’t have that option.

I really don't think you understand how inflation is calculated. Inflation is the average of the increase in price weighted by the proportion of spending on each item meaning that unless your spending is highly atypical for every bill that has increased by more than inflation another has increased by less than inflation.

 

[greyman42]

I suspect that shortly there is going to be an outcry over how little pension some people are going to get from their defined-contribution schemes, particularly as a result of the recent down-turns in the stock markets caused by Covid. I understand that some people have seen significant falls in their pension pots.

This is true and as I have said in other threads, it seems to of gone straight over peoples heads. It is also an important reason why we need to restart the economy immediately.

 

[lyndhurst25]

About all this debt that our government is supposedly getting itself into because of the COVID crisis: who are they actually borrowing the money from and at what interest rate? The international "market"? Who benefits from that? Not something that your average citizen can easily get involved with.

You used to be able to buy British government bonds at the Post Office, war bonds by post, local authority bonds from your local town hall, and permanent interest bearing shares from your building society. All ways of raising cash and the benefits kept locally. Anyone with savings will know that the interest rate paid on savings accounts is next to nothing, so there must be billions of pounds looking for a safe home that would pay a decent income. Maybe the government should be looking more towards the British public and issuing COVID bonds?

 

[Bald Rick]

About all this debt that our government is supposedly getting itself into because of the COVID crisis: who are they actually borrowing the money from and at what interest rate? The international "market"? Who benefits from that? Not something that your average citizen can easily get involved with.

Big financial institutions, which have got their money from investors, including people contributing to pensions, so ultimately anyone who has a workplace pension.

Rates at present are typically around 0.4%.

 

[deltic]

About all this debt that our government is supposedly getting itself into because of the COVID crisis: who are they actually borrowing the money from and at what interest rate? The international "market"? Who benefits from that? Not something that your average citizen can easily get involved with.

You used to be able to buy British government bonds at the Post Office, war bonds by post, local authority bonds from your local town hall, and permanent interest bearing shares from your building society. All ways of raising cash and the benefits kept locally. Anyone with savings will know that the interest rate paid on savings accounts is next to nothing, so there must be billions of pounds looking for a safe home that would pay a decent income. Maybe the government should be looking more towards the British public and issuing COVID bonds?

You can still easily buy premium bonds, national savings certificates and government bonds/gilts except like most things these days they tend to most easily available on-line. The Government Debt Management Office sets out how the public can buy bonds on a dedicated web page.

 

[HH]

I really don't think you understand how inflation is calculated. Inflation is the average of the increase in price weighted by the proportion of spending on each item meaning that unless your spending is highly atypical for every bill that has increased by more than inflation another has increased by less than inflation.

That's quite amusing. Everyone's spending is atypical, unless your spending was identical to the split in the current basket. I'm pretty sure that my spending is quite different to yours, so we will experience different inflations. In any case it is calculated using a "basket" of items that changes regularly, and some items are excluded, so it doesn't show the whole picture at all.

 

[HLE]

I'm not sure exactly how much this will raise and this I admit is ambitious to achieve, but the elephant in the room when it comes to public finance struggles is tax avoidance, in particular the abuse of tax havens by the richest individuals and corporations to avoid paying the UK proper tax revenue (and other world governments for that matter).

Tax rises will still be needed in general, but there really needs to be consideration to end abuse of tax havens worldwide to stop this morally wrong behaviour from going on, now more than ever. This could be by either closing them down (i.e. charging full tax rates compared to their dependency country's rate), or if the locals do need tax relief still, then a cap on low/nil tax rates at a threshold where many low income residents are supported, but billionaires, large corporations, etc. would still be forced to pay fairly.

An age old debate. Yes, the big corporations and billionaire business owners spend shed loads employing tax consultants and accountants to structure their company in a way that avoids as much tax as legally possible. Spend 90p to save £1. Net gain 10p but the owner would rather save the 10p.

In the past I've been paid to save companies and their directors tax, and structure their affairs as effeciently as possible. No dodgy offshore schemes mind, I wasn't paid enough to check them out or put my neck on the line to use them - and the directors were small beer wealth wise compared to those using them. Can cost over a million just to set them up. Close them loopholes, people say. I agree, morally speaking, as there's too many branson's out there. Why should us mere mortals toe the line and see these billionaires register their businesses abroad to pay a lower rate of tax after all?

It makes me chuckle though when 'tax the higher earners more' is chanted from the rooftops and the redtop newspapers though. Same people who then say nurses should get a decent pay rise (yep agreed) BUT when asked how it would be funded say it would be paid from the 10k rise the MP's got in the past (real world and all that). I'm sure the nurses would rightly be insulted by the resulting £20 a year pay rise they would get from that. Diane Abbot maths at its finest.

It's been said on this thread and it's very realistic that the top 1% of earners in the country pay roughly a third of the nation's tax bill. Keep them doing that, because I don't want to fill the void that would be created if they decide to move to another country. Increase the tax bills for the rich too much and the tax havens will benefit the most. You'll never stop it while we can't control what other countries set as their tax laws.

 

[Clayton]

An age old debate. Yes, the big corporations and billionaire business owners spend shed loads employing tax consultants and accountants to structure their company in a way that avoids as much tax as legally possible. Spend 90p to save £1. Net gain 10p but the owner would rather save the 10p.

In the past I've been paid to save companies and their directors tax, and structure their affairs as effeciently as possible. No dodgy offshore schemes mind, I wasn't paid enough to check them out or put my neck on the line to use them - and the directors were small beer wealth wise compared to those using them. Can cost over a million just to set them up. Close them loopholes, people say. I agree, morally speaking, as there's too many branson's out there. Why should us mere mortals toe the line and see these billionaires register their businesses abroad to pay a lower rate of tax after all?

It makes me chuckle though when 'tax the higher earners more' is chanted from the rooftops and the redtop newspapers though. Same people who then say nurses should get a decent pay rise (yep agreed) BUT when asked how it would be funded say it would be paid from the 10k rise the MP's got in the past (real world and all that). I'm sure the nurses would rightly be insulted by the resulting £20 a year pay rise they would get from that. Diane Abbot maths at its finest.

It's been said on this thread and it's very realistic that the top 1% of earners in the country pay roughly a third of the nation's tax bill. Keep them doing that, because I don't want to fill the void that would be created if they decide to move to another country. Increase the tax bills for the rich too much and the tax havens will benefit the most. You'll never stop it while we can't control what other countries set as their tax laws.

Yes but all apart from the lowest paid can pay a bit more income tax, especially those on decent incomes but not earning enough to be tax dodgers. London can pay more council tax too on their expensive properties, thus reducing the amount they need from government . I’d certainly be happy to pay a bit more.

 

[HH]

The real way to tax the very rich more is to tax the things they buy. I doubt that this government has the desire to do that though - after all it would be Turkeys voting for Xmas...

 

[Clayton]

The real way to tax the very rich more is to tax the things they buy. I doubt that this government has the desire to do that though - after all it would be Turkeys voting for Xmas...

Purchase taxes are unfair in that they affect rich and poor equally, and a tax on luxuries would raise insignificant amounts. Taxing income is fairer, and trying to winkle out the money hidden away abroad

 

[HH]

Purchase taxes are unfair in that they affect rich and poor equally, and a tax on luxuries would raise insignificant amounts. Taxing income is fairer, and trying to winkle out the money hidden away abroad

It was why I said tax the things that the rich buy. Not many poor people buying yachts...

 

[KevinTurvey]

I'd be against cutting the state pension to be honest. Even the most you can get after a lifetime of work is £134.25 per week. We will all get old!
I would favour cutting the tax loopholes that enable certain individuals and corporations to avoid paying their fair share of tax.
I would also scrap stupid government schemes such as help to buy which just inflate house prices and make a few people very rich.

 

[Bletchleyite]

I would also scrap stupid government schemes such as help to buy which just inflate house prices and make a few people very rich.

I definitely agree with that. Ban "help to buy", minimum deposit for a mortgage of any kind 10% and ban the offering of shared ownership either entirely[1] or where the rent is below the market rate of private rental in that area.

Do all that, and there will be a short period of pain, then prices will correct themselves naturally to a more affordable level.

[1] If banned entirely, retain the "Islamic mortgage" as that is for a different purpose but uses some of the concepts of shared ownership and has no meaningful effect on prices.

 

[westv]

I'd be against cutting the state pension to be honest. Even the most you can get after a lifetime of work is £134.25 per week.

Is it not £175?

 

[Bald Rick]

It was why I said tax the things that the rich buy. Not many poor people buying yachts...

Not many rich people buy yachts either, and those that do can buy them anywhere else in the world (and usually do). Sunseeker sell around 100 ‘yachts’ a year.

 

[brad465]

I'd be against cutting the state pension to be honest. Even the most you can get after a lifetime of work is £134.25 per week. We will all get old!
I would favour cutting the tax loopholes that enable certain individuals and corporations to avoid paying their fair share of tax.
I would also scrap stupid government schemes such as help to buy which just inflate house prices and make a few people very rich.

I definitely agree with that. Ban "help to buy", minimum deposit for a mortgage of any kind 10% and ban the offering of shared ownership either entirely[1] or where the rent is below the market rate of private rental in that area.

Do all that, and there will be a short period of pain, then prices will correct themselves naturally to a more affordable level.

[1] If banned entirely, retain the "Islamic mortgage" as that is for a different purpose but uses some of the concepts of shared ownership and has no meaningful effect on prices.

Hasn't Help to Buy been curtailed anyway? Yes there are a number of existing users (I admit I have a Help to Buy ISA myself), but as of November last year no new accounts can be issued, I don't know if the same applies for equity loans.


This will no doubt be a very opinionated political statement, but as much I would love tax avoidance practices through tax havens to be abolished, a large part of the mainstream media and Tory party donors are linked to such tax avoidance, so without things like mass protests and online campaigns raising the issue (albeit Richard Branson has helped this along), change will be hard to initiate.

 

[HH]

Not many rich people buy yachts either, and those that do can buy them anywhere else in the world (and usually do). Sunseeker sell around 100 ‘yachts’ a year.

Even small yachts are hard to afford for any but the very comfortably off. But yachts was only an example. Define certain things as luxury goods and raise the VAT. As for buying elsewhere, I do feel that there has to be some international cooperation - and everyone in going to be in the same yacht.

 

[Horizon22]

Yes but all apart from the lowest paid can pay a bit more income tax, especially those on decent incomes but not earning enough to be tax dodgers. London can pay more council tax too on their expensive properties, thus reducing the amount they need from government . I’d certainly be happy to pay a bit more.

Great lets make renting even more expensive for the majority of people living in the city under 40.

 

[stevetay3]

Is it not £175?

Two levels of state pension now, so more inequality. I believe those on the lower rate can get pension credit depending on there circumstances.

 

[HH]

Let's start from the beginning. There are four types of taxes:
1. Taxes on goods
2. Taxes on earnings
3. Taxes on assets (sale or purchase, or IHT)
4. Taxes on businesses (of which employers' NI is one)

All have their potential downsides, which would have to be overcome.

1. These are regressive taxes in general, hence my suggestion that they should be targeted, so that they hit the poorest least (or preferably not at all)
2. The problem is that those earning the most have the wherewithal to "protect" their earnings if taxes are too high, so rises can be self-defeating, hence my suggestion of an NHS surcharge on NI. Still I think things can be done with IT - e.g. raise the rate but increase the personal allowance, so that the poorest (who pay tax) are taken outside the tax system.
3. There are issues around people who are asset rich and cash poor. I can't think of any way around that, but honestly if people have to leave their 6 bedroom mansion in Surrey (and downsize to a 5-bed), because they got a £60k tax bill, then I'm not going to lose a lot of sleep over it. Again, I think this has to be aimed at the top end - the object is not to force Fred & Mabel out of their £200k semi.
4. The possible downside here is pushing firms out of business or (e.g. if you hit ERS NI) cause them to cut staff. Therefore the focus should be on the large companies who are not paying their fare share, i.e. changing the rules so that they can't avoid/evade paying a fair amount, based on their earnings in this country.

 

[JonathanH]

3. There are issues around people who are asset rich and cash poor. I can't think of any way around that, but honestly if people have to leave their 6 bedroom mansion in Surrey (and downsize to a 5-bed), because they got a £60k tax bill, then I'm not going to lose a lot of sleep over it.

That actually clobbers them twice, once on the tax bill for their existing property and then again with stamp duty on the purchase of the 5-bed house. I get why you won't lose any sleep over the plan but it doesn't quite work. I think it would better if seen as 'a few extra years on the mortgage'.

 

[HH]

That actually clobbers them twice, once on the tax bill for their existing property and then again with stamp duty on the purchase of the 5-bed house. I get why you won't lose any sleep over the plan but it doesn't quite work. I think it would better if seen as 'a few extra years on the mortgage'.

The people who have trouble won't be working and therefore are unlikely to have a mortgage. In your example it would be easy enough for the government to waive stamp duty for payers of the "wealth tax". These are relatively simple obstacles to overcome.

 

[deltic]

There is no need to raise taxes which will be counter productive given the country is likely to be stuffed for many years. Government should just "print" the money via the Bank of England to pay for the all short term measures that have been implemented.

 

[underbank]

The real way to tax the very rich more is to tax the things they buy. I doubt that this government has the desire to do that though - after all it would be Turkeys voting for Xmas...

But it's not that simple. Wasn't there a recent situation where a millionaire sports personality bought a private aircraft or yacht via Isle of Man to avoid paying VAT on it??

 

[HH]

But it's not that simple. Wasn't there a recent situation where a millionaire sports personality bought a private aircraft or yacht via Isle of Man to avoid paying VAT on it??

Possibly, but where there's a will, there's a way.

There is no need to raise taxes which will be counter productive given the country is likely to be stuffed for many years. Government should just "print" the money via the Bank of England to pay for the all short term measures that have been implemented.

I think that you'd better demonstrate why ALL taxes are counter-productive, because if they were why do we have any taxes at all? And, if printing money has no downsides, why don't they just print, print, print all the time?

 

[Bald Rick]

3. There are issues around people who are asset rich and cash poor. I can't think of any way around that, but honestly if people have to leave their 6 bedroom mansion in Surrey (and downsize to a 5-bed), because they got a £60k tax bill, then I'm not going to lose a lot of sleep over it. Again, I think this has to be aimed at the top end - the object is not to force Fred & Mabel out of their £200k semi.

I know dozens of people in 3/4 bed houses (mostly terraced or semis) that are worth well over a million, mortgaged to the hilt, with 2+ kids. How do you suggest they pay?

 

[JonathanH]

I know dozens of people in 3/4 bed houses (mostly terraced or semis) that are worth well over a million, mortgaged to the hilt, with 2+ kids. How do you suggest they pay?

I'm not necessarily advocating it but from a practical perspective, I think you would simply get the mortgage provider to pay over the relevant amount to the government and then the extra cost would be put on the end of the mortgage by extending the term (or regular payments), similar to what happens with people who breach the annual allowance for pension savings.

As someone noted in another thread, within 10 to 20 years, a political party will come to power on a mandate of applying wealth taxes in some form or another. If the people behind Extinction Rebellion got close to power, it would seem fairly likely

 

[Bald Rick]

I'm not necessarily advocating it but from a practical perspective, I think you would simply get the mortgage provider to pay over the relevant amount to the government and then the extra cost would be put on the end of the mortgage by extending the term (or regular payments), similar to what happens with people who breach the annual allowance for pension savings.

Without going into too much detail, I’m in this situation myself. My mortgage is due to be paid just before my 70th birthday, and is not extendable. I haven’t bought a car for a decade, and have had one family holiday of longer than a week in 11 years. I work around 60 hours a week, and Mrs BR is a full time career. Everything has gone into our house, pending better times, for the sake of our children. My parents (and her parents) did the same 40 years ago. I have no idea how we would pay a wealth tax. I’m am by no means alone in this situation.

As someone noted in another thread, within 10 to 20 years, a political party will come to power on a mandate of applying wealth taxes in some form or another. If the people behind Extinction Rebellion got close to power, it would seem fairly likely

I doubt it. From my observation of the extinction rebellion folk in central London, most of them would have been heavily affected by wealth taxes.

 

[muz379]

Tax revenue is going to take a massive hit this year. Corporation taxes will fall significantly, same with income taxes, stamp duty, fuel duty, Air Passenger duty... the list is long.

I think next year will see huge fall in tax income as well , I cant see the public regaining the confidence to start going back out in their droves to pubs/restaurants/gyms/international travel etc in the short term .

Unfortunately I am not convinced that the government are prepared for this eventuality and the continuing economic downturn into next year .

 

[HH]

I know dozens of people in 3/4 bed houses (mostly terraced or semis) that are worth well over a million, mortgaged to the hilt, with 2+ kids. How do you suggest they pay?

I don't. If they really are mortgaged to the hilt their net worth wouldn't trigger the tax.