Paying back the cost of Covid-19

[JonathanH]

It's quite possible for taxes to go up for a couple of years for a large proportion of people, that will be largely balanced out by money they didn't spend during this year

That is quite a good argument for simply 'confiscating' all income for 2020 that isn't spent. By doing so, people would either consume, putting money back into the economy or pay tax, putting money back into the economy.

 

[3rd rail land]

That is quite a good argument for simply 'confiscating' all income for 2020 that isn't spent. By doing so, people would either consume, putting money back into the economy or pay tax, putting money back into the economy.

I expect you would see large scale protests or even riots if that happened. What about people who are saving up for something big that isn't happening this year such as a deposit for a property, a wedding, relocating etc?

Anyway how would you determine how much income someone hasn't spent? Hypothetically say I earn £3,000 after tax per month but I only spend an average of £2,000 a month. How would the authorities know to 'confiscate' £1,000 a month from me?

 

[underbank]

This is more a function of a badly bodged tax system, where rules varying other rules have been added over the years.

I understand the UK tax rules were just 2 books in 1970. Since then so many complications have been added, now apparently takes 9 books (or 11 books if you use same font size). Realistically need to go back to simple rules

Ultimately taxpayers will pay for years to come. This can be long period, as an example the money UK borrowed from USA under Marshal plan (after WW2) was only finally repaid in 2006

And it's continuing to get worse, despite the "office of tax simplification" which we've had for a decade and has been completely useless - just another load of politicians having meetings and making themselves feel important without actually doing anything useful.

 

[Bantamzen]

That is quite a good argument for simply 'confiscating' all income for 2020 that isn't spent. By doing so, people would either consume, putting money back into the economy or pay tax, putting money back into the economy.

There really isn't, unless of course you wish to impose a North Korean type system. And you might have one or two objectors to that.

 

[Mogster]

That is quite a good argument for simply 'confiscating' all income for 2020 that isn't spent. By doing so, people would either consume, putting money back into the economy or pay tax, putting money back into the economy.

You’d have a massive bank run the moment you suggested it. Everyone with spare cash would withdraw or move it. Stop them doing that and there would be riots or at the very least mass civil disobedience. Demand outstripping supply of stuff to buy would cause inflation also.

 

[underbank]

You’d have a massive bank run the moment you suggested it. Everyone with spare cash would withdraw or move it. Stop them doing that and there would be riots or at the very least mass civil disobedience. Demand outstripping supply of stuff to buy would cause inflation also.

I think the point is that you don't give advanced notice. It happens the moment it's announced. That's what happened in Cyprus where a %age of bank accounts were seized. Caused all kinds of trouble and unfairness, especially where, say, a bank account had a lot of money in it for a short time for a specific purpose, i.e. buying a house, and it meant the purchase couldn't proceed as a chunk of money had gone.

 

[al78]

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.

That is what you get with arguments from emotion, not logic.

 

[BRX]

I don't think most people saying that higher earners should be taxed more, expect it all to come from MP's pay rises. As has been pointed out earlier, a relatively small number of very high earners "pay" a large proportion of tax revenue. It follows that by increasing their rate would bring in a further, usefully large amount of money. The usual objection is of course that they will flee the country in response. Whether that's true or not, we are now in an unusual situation where *all* countries might have to start looking at this as an option. So the opportunities to flee to low tax countries may well decrease somewhat.

 

[Bantamzen]

Mods note - Moved across from this thread:

Coronavirus precautions: Has the world gone mad?

To answer the OP, maybe. I found some of the measures in hospitals (e.g. not having ill people sitting right on top of each other in the waiting room) actually quite nice. But to be honest, that's where it ends. For example, having to stand 2 metres away from the reception desk and having to...

www.railforums.co.uk

I'm wondering if anyone commenting on this thread has any graduate, or postgraduate, qualification in the management and control of infectious diseases? Or perhaps it's speculation without knowledge?

It was not an attempt to engage in debate, more a commentary on the quality of the debate. I'm shaking my head at the armchair experts.

OK then, let's spark a debate regardless. We know that the cost of this crisis for the first three months is in the region of £300-350 billion, we also know that last year's budget for the NHS was £141 billion, and that total tax revenue for the same period was in the region of £650 billion.

Now how would you reconcile the additional deficit you would have us create by extending the lockdown? Its an important question, because believe it or not that bill is going to have to be met, otherwise all services including the NHS will be at serious risk. So rather than shaking your head & tutting, how about you offer up your thoughts on how you would deal with this?

 

[Puffing Devil]

OK then, let's spark a debate regardless. We know that the cost of this crisis for the first three months is in the region of £300-350 billion, we also know that last year's budget for the NHS was £141 billion, and that total tax revenue for the same period was in the region of £650 billion.

Now how would you reconcile the additional deficit you would have us create by extending the lockdown? Its an important question, because believe it or not that bill is going to have to be met, otherwise all services including the NHS will be at serious risk. So rather than shaking your head & tutting, how about you offer up your thoughts on how you would deal with this?

When you say cost - what specifically do you mean? Actual outlay? Opportunity cost? Tax revenue lost? Or is it a notional "$350m weekly to the NHS" type of cost?

 

[swissrailpassion]

Don't be frightened by a deficit. Republicans in the States worried about the deficit and got elected but ended up raising it.
We were coming to the limits of the market and traditional kitchen table economics will not help due to the scale of the crisis. It's not a downturn or a recession in the traditional sense. Normally, supply and demand means contractions are within a small range as actors in the economy seek to mitigate. Larger downturns require some state intervention but there's a sense of things finding a natural level as demand picks up.
This depression is totally different because it was caused by state action. It's an enforced depression which needs huge state support to all sectors to aid recovery.
With unemployment likely to hit 4.5 million this year we need a total Keynesian revolution. Without it no government will survive.

 

[Bantamzen]

When you say cost - what specifically do you mean? Actual outlay? Opportunity cost? Tax revenue lost? Or is it a notional "$350m weekly to the NHS" type of cost?

Lost tax revenue, cost of furloughing staff, cost of increased Universal Credit claims, cost of covid directly on the NHS, cost of running the railways...

And so on.....

Don't be frightened by a deficit. Republicans in the States worried about the deficit and got elected but ended up raising it.
We were coming to the limits of the market and traditional kitchen table economics will not help due to the scale of the crisis. It's not a downturn or a recession in the traditional sense. Normally, supply and demand means contractions are within a small range as actors in the economy seek to mitigate. Larger downturns require some state intervention but there's a sense of things finding a natural level as demand picks up.
This depression is totally different because it was caused by state action. It's an enforced depression which needs huge state support to all sectors to aid recovery.
With unemployment likely to hit 4.5 million this year we need a total Keynesian revolution. Without it no government will survive.

I must confess to not knowing a whole total about that theory of economics. But what I do know is that across the public services, departments are being braced for a very difficult period coming up. Even the Chancellor is downbeat about the immediate economic future. Outside of wartime the effects globally are at an unprecedented level, and the reality is that most experts are signalling a long, deep recession. That I do worry about.

 

[Puffing Devil]

Lost tax revenue, cost of furloughing staff, cost of increased Universal Credit claims, cost of covid directly on the NHS, cost of running the railways...

And so on.....

I can't see a real, tangible, cost there. I think it will be some time before we can total up what this has actually "cost" the treasury - unless you have access to those figures?

 

[Bantamzen]

I can't see a real, tangible, cost there. I think it will be some time before we can total up what this has actually "cost" the treasury - unless you have access to those figures?

These estimates have been doing the round for a while, but your starter for ten is some of the numbers coming our of the Office for Budget Responsibility. They put the total potential borrowing in the region of £300 billion, with around £133 billion spending that is as direct results of government decision making.

Coronavirus analysis - Office for Budget Responsibility

This page brings together all coronavirus databases and analysis produced by the OBR on an ad-hoc basis or within our core documents between April 2020 and March 2021.

obr.uk

It goes without saying that the longer the lockdown, the greater the cost. Now nobody wants to put lives before economics, but it is a reality that the two are linked. Less money moving through the economy means less money for services.

So if a longer lockdown were enforced, how would you suggest this be handled, especially in the light of an economic slowdown in April of 20.4%?​

 

[Puffing Devil]

Collection of taxes from offshore companies and closure of tax loopholes. Reframing of priorities. Cancellation of Road projects and HS2. Investment in government-funded projects aligned to environmental change: bike lanes, green power plans reclaiming the countryside, labour-intensive farming. Building green council housing. Invest in teachers, defund special advisers.

 

[Bantamzen]

Collection of taxes from offshore companies and closure of tax loopholes. Reframing of priorities. Cancellation of Road projects and HS2. Investment in government-funded projects aligned to environmental change: bike lanes, green power plans reclaiming the countryside, labour-intensive farming. Building green council housing. Invest in teachers, defund special advisers.

OK, to pick out a couple of your ideas.

Collecting taxes from offshore companies & loopholes is one I could get behind, but there has been a huge amount of pressure on successive governments to cut out offshoring so I'm not sure this current government would have the will, or the ideas to do this. And even if they did it might need years of legislation to get to the point at which we could start to recover the losses. Unfortunately we need solutions that can be in play a lot sooner.

As for large scale projects like HS2 we've been down this road before on the HS2 thread. The cost of that project is spread over the entire lifespan of it. Cancelling it would offer only a tiny fraction of the funds made available immediately, if at all. And it kind of contradicts your next ideas for government funded projects, of which this is definitely one. Finally farming would be another nice one to have, but a lot of our countryside is privately owned and not available for farming. So its another measure that would take many years to get into play.

And so we get back to the original problem. The cost of covid, both directly & indirectly is going to be felt in this financial year. We need solutions for that now not years into the future if a lockdown is to be continued.

 

[LNW-GW Joint]

The cost of Covid-19 will be seen in sharply increased government borrowing as the government pumps money into a reduced economy.
Interest rates are low at the moment but are likely to rise as inflation starts to bite.
The pressure will be on "revenue" spend (government payroll and operating costs) rather than capital (eg HS2 or green capital investment).
Once the health crisis is over all public services will be under great pressure because there will not be the tax take to pay for them.
This is because of the closure/slimming down of businesses because of Covid.

There's a competitive element to this as different countries cope better or worse with the virus.
Currently we are sinking towards the bottom of economic impact, countries like Germany, Japan and Australia are doing much better (so far).
Interest rates, and the value of the £, depend on the credit-worthiness of the government internationally.
Then there's Brexit coming.

The railway always expects to sail unaffected through crises of the outside world.
This time there is unlikely to be an escape from the inevitable cutbacks in government support, coming as soon as the health panic is over.
It's already costing nearly £1 billion a month to keep the railway going with negligible income.
That will have to be paid for one day.

 

[Silverlinky]

The cost of Covid-19 will be seen in sharply increased government borrowing as the government pumps money into a reduced economy.
Interest rates are low at the moment but are likely to rise as inflation starts to bite.
The pressure will be on "revenue" spend (government payroll and operating costs) rather than capital (eg HS2 or green capital investment).
Once the health crisis is over all public services will be under great pressure because there will not be the tax take to pay for them.
This is because of the closure/slimming down of businesses because of Covid.

There's a competitive element to this as different countries cope better or worse with the virus.
Currently we are sinking towards the bottom of economic impact, countries like Germany, Japan and Australia are doing much better (so far).
Interest rates, and the value of the £, depend on the credit-worthiness of the government internationally.
Then there's Brexit coming.

The railway always expects to sail unaffected through crises of the outside world.
This time there is unlikely to be an escape from the inevitable cutbacks in government support, coming as soon as the health panic is over.
It's already costing nearly £1 billion a month to keep the railway going with negligible income.
That will have to be paid for one day.

As a railway employee even I can see this......and sooner (September?) or later train companies will have to cut their cloth accordingly or will hand the keys back.

The upshot will be the same, many redundancies and cuts across the network to services and frequencies to compensate for the lack of passengers and revenue.

 

[Meole]

Motorway tolls apply in many countries and there is an element of choice in their use.

As the public sector was exempt from furlough how about a 10% salary reduction across the board ?

 

[Bletchleyite]

The problem with motorway tolls other than additional ones like the M6 Toll is that people clog up A roads to avoid them.

A full road pricing system would be better.

 

[Bletchleyite]

The upshot will be the same, many redundancies and cuts across the network to services and frequencies to compensate for the lack of passengers and revenue.

I'd welcome a policy of fewer, longer trains. Punctuality would be restored to what is a seriously overcrowded network with far too many short trains squeezed into it. If that saves money, bonus.

 

[Silverlinky]

I'd welcome a policy of fewer, longer trains. Punctuality would be restored to what is a seriously overcrowded network with far too many short trains squeezed into it. If that saves money, bonus.

I agree....the default has been to run more and more trains, squeezing the margins, and making it impossible to recover if anything goes wrong.

 

[Smidster]

Motorway tolls apply in many countries and there is an element of choice in their use.

As the public sector was exempt from furlough how about a 10% salary reduction across the board ?

When you say "exempt from furlough" what you really mean is "carried on doing their jobs...often in even more stressful situations than normal"

Remember that 99% of the public sector are key workers - nurses, police and those keeping things ticking over - you want to give all of those people, who are not particularly well paid, a large pay cut?

And let's say you did - what do you think happens to that money? Some is taxed directly and the rest is spent helping the economy in other ways. Those lucky enough to have jobs are vital right now to the recovery...last thing you want is even more people struggling to make ends meet.

 

[Bald Rick]

I'd welcome a policy of fewer, longer trains. Punctuality would be restored to what is a seriously overcrowded network with far too many short trains squeezed into it. If that saves money, bonus.

Doesn’t really work for the majority of passenger traffic though, ie into London.

 

[al78]

The problem with motorway tolls other than additional ones like the M6 Toll is that people clog up A roads to avoid them.

A full road pricing system would be better.

Where the price is proportional to the level of traffic congestion. More congestion = higher price to use road, operates like cost vs demand across other modes of transport. Would need some way to communicate to drivers which roads are congested to give them an informed choice.

 

[Bantamzen]

Motorway tolls apply in many countries and there is an element of choice in their use.

As the public sector was exempt from furlough how about a 10% salary reduction across the board ?

As a public sector worker myself who has worked from home all through this, I am curious as to why you think people like myself & indeed those of my colleagues who have travelled to work daily, all of which to keep vital functions running should now take a pay cut?

 

[Bletchleyite]

Doesn’t really work for the majority of passenger traffic though, ie into London.

It probably does off-peak (though not so much on Thameslink due to the fixed formations). 4tph of 4-car could become 2tph of 8-car.

 

[Bletchleyite]

Where the price is proportional to the level of traffic congestion. More congestion = higher price to use road, operates like cost vs demand across other modes of transport. Would need some way to communicate to drivers which roads are congested to give them an informed choice.

I've long been surprised the M6 Toll (which is now quite expensive) doesn't do that.

 

[Bald Rick]

It probably does off-peak (though not so much on Thameslink due to the fixed formations). 4tph of 4-car could become 2tph of 8-car.

Off peak isn’t where the problems are, though. The performance stats for Saturdays show that clearly.

I've long been surprised the M6 Toll (which is now quite expensive) doesn't do that.

It does, in a fashion. There has always been a lower price for ‘off peak’ times, and there are signs in advance giving notice of issues on the main M6. I’ve recently seen variable pricing too, ie a different price for the same time of day / week. But in any event, the M6 toll is never congested, except for the toll booth!

 

[al78]

As a public sector worker myself who has worked from home all through this, I am curious as to why you think people like myself & indeed those of my colleagues who have travelled to work daily, all of which to keep vital functions running should now take a pay cut?

It is trendy to hate public sector workers, even if it is irrational. I think it comes from the idea that they get gold plated pensions (i.e. envy).