The mini-budget

[japancool]

Measures announced include:

Corporation tax rise from 19% to 25% scrapped.
NI rise reversed.
Stamp duty slashed.
Cap on bankers' bonuses slashed.
Tax-free shopping for overseas visitors.
Unions required to put pay offers to members during strikes.
Basic rate of income tax cut by 1% from next year.
Energy support to cost £60 billion for the next six months.

What does this mean for you and your business? And what will it mean for the country?

 

[Mark T Jones]

The Viv Nicholson school of economics?

Spend, Spend, Spend - Wikipedia

en.m.wikipedia.org

 

[IanSuth]

It will mean inflation for longer to inflate away the massive extra borrowing

 

[lesliedocherty]

She is certainly bold and seems quite sure-footed.

 

[Newchodge]

I would suggest it means doom for a lot of people and businesses.

 

[The Soup Dragon]

It all has to be paid for in the end

 

[japancool]

Something that I missed - IR35 is being repealed.

 

[The Byre]

I shall have to study the runes, get the economics voodoo woman to pee in a pot of chicken entrails and see where these measures will lead.

But we have had 12 years of bad economics and nothing the various Tory governments did in that period worked. That is the sad reality of where we are.

Austerity and high taxes didn't work - that just made things bad by depressing real GDP. Massive largesse, even higher taxes and wild bouts of QE made bad turn into far worse. Now we are saddled with record borrowings, public AND private, we have record inflation and it looks as though it will get worse and to top it all off, the rest of the world is looking much the same!

• GDP is $2.7tn.
• Government debt is now $2.8tn.
• Government deficit spending is 2.6% of GDP.
• Interest on that debt will cost the UK $96bn this year. That is DOUBLE the defense budget.
• Interest on that debt will be half the entire NHS budget next year.
• The Laffer Curve for the UK prevents any increase in gov. revenue after gov. spending reaches 33% of GDP.
• The Laffer Curve for the UK reduces gov. revenue when spending goes above 40% of GDP.
• Government spending is today 52% of GDP.

Twelve years of gross economic mismanagement has placed the UK a totally unsustainable position. Something drastic has to be done by somebody - and quickly!

What that something is, I do not (yet) know!

 

[japancool]

Twelve years of gross economic mismanagement has placed the UK a totally unsustainable position. Something drastic has to be done by somebody - and quickly!

What that something is, I do not (yet) know!

Time for revolution, comrades!

 

[tony84]

Tax-free shopping for overseas visitors.

I do not understand the reasoning behind this? It does not help with inflation, it does not help with the cost of living and it does not help with the massive deficit we are running.

It was not asked for (certainly not in public) and does not appear needed. What am I missing?

As for the budget, when he turns around and says they are going to get the debt down as a percentage of GDP but we hope to get GDP up, I can only take from that the national debt is going up to pay for all of this. The only analogy I can thing of is "I am going to pay for this new car on my credit card, but to pay for the credit card I then need to get a pay rise". I cant help but think there are probably safer hands for our public finances.

 

[japancool]

I do not understand the reasoning behind this? It does not help with inflation, it does not help with the cost of living and it does not help with the massive deficit we are running.

It was not asked for (certainly not in public) and does not appear needed. What am I missing?

It's supposed to attract overseas visitors to come here and shop. It helps high-end shops, where the rich visitors go, but it's not so great for middle and low end shops.

I haven't seen details of how it will work though.

In fairness, this is not uncommon in countries with a large tourist sector. Thailand and Japan have similar schemes.

 

[Newchodge]

It's supposed to attract overseas visitors to come here and shop. It helps high-end shops, where the rich visitors go, but it's not so great for middle and low end shops.

I haven't seen details of how it will work though.

In fairness, this is not uncommon in countries with a large tourist sector. Thailand and Japan have similar schemes.

Perhaps I dreamt it, but I thought foreign visitors could already reclaim VAT paid?

 

[japancool]

Perhaps I dreamt it, but I thought foreign visitors could already reclaim VAT paid?

Apparently they could up until the end of 2020, when it was abolished.

Basically, they're trying to attract back the rich Chinese visitors who have decided to holiday in Europe instead of the UK (since a Schengen visa allows visiting many countries, instead of just one).

 

[Newchodge]

Apparently they could up until the end of 2020, when it was abolished.

Basically, they're trying to attract back the rich Chinese visitors who have decided to holiday in Europe instead of the UK (since a Schengen visa allows visiting many countries, instead of just one).

You couldn't make it up, could you?

 

[japancool]

You couldn't make it up, could you?

That's what this government seems to be doing, making it up as they go along.

 

[Bob Morgan]

Time for revolution, comrades!

"We're your Firing Squad Ms Truss! . . . We aim to please!"

 

[Truemanbrown]

That surely means that there will be serious cuts in the money going to the public services.

They can start by getting rid of the diversity departments that are springing up all over the NHS and other public services. Maybe we will now get the bonfire of the Quangos that the Tories promised in 2010.

The repeal of the 2017 and 2021 IR35 reforms will help a great deal. You will now see the return of one man band hauliers so that should help the haulage industry. You will see the return of more locums so maybe GPs may get back to operating as they should be.

 

[simon field]

I shall have to study the runes, get the economics voodoo woman to pee in a pot of chicken entrails and see where these measures will lead.

But we have had 12 years of bad economics and nothing the various Tory governments did in that period worked. That is the sad reality of where we are.

Austerity and high taxes didn't work - that just made things bad by depressing real GDP. Massive largesse, even higher taxes and wild bouts of QE made bad turn into far worse. Now we are saddled with record borrowings, public AND private, we have record inflation and it looks as though it will get worse and to top it all off, the rest of the world is looking much the same!

• GDP is $2.7tn.
• Government debt is now $2.8tn.
• Government deficit spending is 2.6% of GDP.
• Interest on that debt will cost the UK $96bn this year. That is DOUBLE the defense budget.
• Interest on that debt will be half the entire NHS budget next year.
• The Laffer Curve for the UK prevents any increase in gov. revenue after gov. spending reaches 33% of GDP.
• The Laffer Curve for the UK reduces gov. revenue when spending goes above 40% of GDP.
• Government spending is today 52% of GDP.

Twelve years of gross economic mismanagement has placed the UK a totally unsustainable position. Something drastic has to be done by somebody - and quickly!

What that something is, I do not (yet) know!

Do we still have comparatively low productivity in the uk?

 

[japancool]

Do we still have comparatively low productivity in the uk?

UK productivity is slightly higher than the EU average, but slightly lower than the Eurozone average.

 

[HFE Signs]

Am I the only one who is worried about all this borrowing and how the hell it's ever going to be paid back!

 

[tony84]

Am I the only one who is worried about all this borrowing and how the hell it's ever going to be paid back!

Nope. People think taxes were high yesterday, its going to get painful in 2 years time.

I hate getting into politics, but since tories came in borrowing has gone up year on year (even pre covid) but what has improved? In fact, lets be nice - what has not got worse?

 

[simon field]

but what has improved? In fact, lets be nice - what has not got worse?

Air quality?

Oh, actually, that was a Covid thing…

Nothing!

 

[The Byre]

Am I the only one who is worried about all this borrowing and how the hell it's ever going to be paid back!

I am not worried about whether it will or will not be repaid - I could answer that question right now!

It will NOT be repaid.

It will NEVER be repaid.

It cannot be repaid. Repayment is mathematically impossible!

It will be inflated away. In the meantime, we all have to pay the interest at $96bn p.a. Suck it up, kids!

Do we still have comparatively low productivity in the uk?

In cold, hard currency terms, we are below the EU average - but alarmingly, productivity measured in real terms is FALLING and has been falling since 2008.

Reason 1 - Wildly escalating government spending. Government spending was 37% of GDP in 2008. Today it is 52%. Government spending is, by definition, non-productive. Governments do not generate profits. It is in part, the old guns-or-butter debate - guns being the symbol for unproductive but needed public expenditure, butter being the profits from private enterprise.

Reason 2 - Poor vocational training. For example, most business people have never gone to business school. The trades are poorly represented and the education in many trades is poor. Technical tertiary education is lacking, with most tertiary education going for arts courses that are nearly always non-productive.

Reason 3 - Low levels of investment in capital goods by industry. Low minimum wage and low standards of living for the lowest paid in society mean that it is cheaper to hire another worker than to invest in automation or a better fleet of trucks. It is usually cheaper to have a few guys struggling with hand-pumped pallet dollies than to buy one decent telehandler!

 

[Newchodge]

I am not worried about whether it will or will not be repaid - I could answer that question right now!

It will NOT be repaid.

It will NEVER be repaid.

It cannot be repaid. Repayment is mathematically impossible!

It will be inflated away. In the meantime, we all have to pay the interest at $96bn p.a. Suck it up, kids!


In cold, hard currency terms, we are below the EU average - but alarmingly, productivity measured in real terms is FALLING and has been falling since 2008.

Reason 1 - Wildly escalating government spending. Government spending was 37% of GDP in 2008. Today it is 52%. Government spending is, by definition, non-productive. Governments do not generate profits. It is in part, the old guns-or-butter debate - guns being the symbol for unproductive but needed public expenditure, butter being the profits from private enterprise.

Reason 2 - Poor vocational training. For example, most business people have never gone to business school. The trades are poorly represented and the education in many trades is poor. Technical tertiary education is lacking, with most tertiary education going for arts courses that are nearly always non-productive.

Reason 3 - Low levels of investment in capital goods by industry. Low minimum wage and low standards of living for the lowest paid in society mean that it is cheaper to hire another worker than to invest in automation or a better fleet of trucks. It is usually cheaper to have a few guys struggling with hand-pumped pallet dollies than to buy one decent telehandler!

We have had an unrepaid national debt since the early 1800's. Never seems to have caused a problem. The government can, if it chooses, legislate how much interest is paid on the national debt, from 0% upwards. Why are people so fixated on the national debt. As one of the few sensible commentators once said - we can afford to do anything we choose to do.

Government spending is, by definition, non-productive.

Only because the definition of GDP is made by the Government. Government spending on state benefits is productive as it gives money to people who would otherwise not have it and they use that money to spend in the economy. Government spending on tanks is productive as it adds to the profits of the tank manufacturers etc etc.

 

[IanSuth]

I am not worried about whether it will or will not be repaid - I could answer that question right now!

It will NOT be repaid.

It will NEVER be repaid.

It cannot be repaid. Repayment is mathematically impossible!

It will be inflated away. In the meantime, we all have to pay the interest at $96bn p.a. Suck it up, kids!


In cold, hard currency terms, we are below the EU average - but alarmingly, productivity measured in real terms is FALLING and has been falling since 2008.

Reason 1 - Wildly escalating government spending. Government spending was 37% of GDP in 2008. Today it is 52%. Government spending is, by definition, non-productive. Governments do not generate profits. It is in part, the old guns-or-butter debate - guns being the symbol for unproductive but needed public expenditure, butter being the profits from private enterprise.

Reason 2 - Poor vocational training. For example, most business people have never gone to business school. The trades are poorly represented and the education in many trades is poor. Technical tertiary education is lacking, with most tertiary education going for arts courses that are nearly always non-productive.

Reason 3 - Low levels of investment in capital goods by industry. Low minimum wage and low standards of living for the lowest paid in society mean that it is cheaper to hire another worker than to invest in automation or a better fleet of trucks. It is usually cheaper to have a few guys struggling with hand-pumped pallet dollies than to buy one decent telehandler!

This

And flip flopping govt plans

For instance; How many millions, no billions have be spent by companies (and public depts) planning for and implementing IR35, how many long term contractors had their contracts terminated for fear of disguised employment claims, how much did lawyers make out of it ETC, ETC and now all for nothing - just when it was getting to the point it might actually have started to bear fruit in terms of stopping the excesses of off payroll employment.

 

[IanSuth]

We have had an unrepaid national debt since the early 1800's. Never seems to have caused a problem. The government can, if it chooses, legislate how much interest is paid on the national debt, from 0% upwards. Why are people so fixated on the national debt. As one of the few sensible commentators once said - we can afford to do anything we choose to do.

Only whilst the world financial markets value UK govt dept - if it gets to a point they no longer have confidence we can repay at least the interest on time then the merry-go-round stops, and as it gets closer to that point the interest rate goes up (we cant legislate an effective 0% interest payment as the money for the repayments has to come from external of our economy in some from even as overpriced imports/underpriced exports due to exchange rates - we are not a closed economy) and it very quickly turns a crisis into a disaster

 

[japancool]

The government can, if it chooses, legislate how much interest is paid on the national debt, from 0% upwards.

If the government sets the rate too low, investors won't buy government bonds, and it won't be able to raise money, unless the BOE buys government bonds - i.e. the printing money.

 

[japancool]

Government spending on tanks is productive as it adds to the profits of the tank manufacturers etc etc.

Unless, of course, the tanks are made overseas. Ours are not, but the enormously expensive F-35 planes for the RAF and RN are.

 

[japancool]

Only whilst the world financial markets value UK govt dept - if it gets to a point they no longer have confidence we can repay at least the interest on time then the merry-go-round stops, and as it gets closer to that point the interest rate goes up (we cant legislate an effective 0% interest payment as the money for the repayments has to come from external of our economy in some from even as overpriced imports/underpriced exports due to exchange rates - we are not a closed economy) and it very quickly turns a crisis into a disaster

And yields have risen since the budget (I'm not going to call it a "fiscal event"), showing that the markets are losing their confidence in the UK's ability to repay its debt.

 

[IanSuth]

Unless, of course, the tanks are made overseas. Ours are not, but the enormously expensive F-35 planes for the RAF and RN are.

And bits of the tanks are manufactured overseas (or owned by overseas manufacturers).

New British tanks to feature Israeli Laser Warning System

Elbit Systems UK has been selected to provide the Elbit Laser Warning System (ELAWS) as part of the Challenger 3 Programme.

ukdefencejournal.org.uk

Also years ago the company that makes sliprings for tank turrets and submarine telescopes (the bit that allows comms between the bit that turns and the bit that sits still) was bought by the Germans. It's company name sort of gives it away (and what they do). They were RoTech now Schleifring systems

 

[IanSuth]

From BBC (excerpts)

Jane Foley, a currency strategist at Rabobank, said the sell-off showed investors have doubts about the government's plans.
"They're worried that some of these tax cuts that have been announced aren't going to be fully funded. That will result in a large amount of debt at a time when the Bank of England is going to be selling some of its holdings of UK government debt," she said.
"I think this government does need to provide a lot more reassurance that it does have fiscal sensibility in order. This is not the message that's come across this morning."

The government had to tell the markets that it needed to borrow an extra £72bn this year, but did not publish the numbers behind that. Interest rates charged for British debt hit 4%, having been 3.1% earlier this week, and 1.8% at the beginning of the leadership contest with Rishi Sunak.
The Treasury's answer to all this is a table of forecasts which shows how much tax revenue would be raised if its reforms were able to permanently raise growth in the economy.
But that table, while an aspiration that every chancellor and every politician seeks, has not convinced the markets. It is an assumption of extra tax revenue that has replaced actual tax

 

[Office Mover]

Measures announced include:

Corporation tax rise from 19% to 25% scrapped.
NI rise reversed.
Stamp duty slashed.
Cap on bankers' bonuses slashed.
Tax-free shopping for overseas visitors.
Unions required to put pay offers to members during strikes.
Basic rate of income tax cut by 1% from next year.
Energy support to cost £60 billion for the next six months.

What does this mean for you and your business? And what will it mean for the country?

Tories keeping the money where it is as usual!

 

[japancool]

It has been mentioned that the last tax-cutting budget of this size by a Conservative government, in 1972, was followed by an energy crisis and an asset bubble. When the latter burst, the country suffered stagflation and inflation at 24%. And there was an attempt to limit industrial action then as well.

Don't politicians study history?

 

[TMark]

There's a definite whiff of 1970s around these days. Or maybe it's just my brown, orange and mustard checked shirt.

 

[simon field]

There's a definite whiff of 1970s around these days. Or maybe it's just my brown, orange and mustard checked shirt.

I’ll reply to this when I’ve finished watching my Sweeney box set

 

[Picture Bute]

Something that I missed - IR35 is being repealed.

No it isn't.

The changes from 2017 and 2020, which puts the status determination onto the end client are being rolled back.

IR35 remains, as it was prior to the 2017 changes, with the status determination (and consequences of that choice) being down to the contractor. It remains to be seen whether larger users of contractors, such as finance etc revert back to allowing Ltd Co Contractors or carry on with blanket bans as they have now. At the end of the day, it makes no odds to clients really. They currently have a no hassle/no risk method of dealing with contractors. Where is the incentive to go back ?

 

[thetiger2015]

.

Don't politicians study history?

yes...they know that history repeats itself and they are feathering their own nests while they can...something politicians have done for decades in almost every country on the planet.

Eventually, it will come crashing down again, when people realise they're being had but we're a couple of years away from that. That's why the new tax changes will benefit the rich the most, extra feathers all round!

 

[WaveJumper]

Perhaps I dreamt it, but I thought foreign visitors could already reclaim VAT paid?

The system got scrapped back if I remember correctly 2021 so its just basically being reinstated as far as I can see

 

[Justin Smith]

Thatcher only cut taxes when she'd balanced the books.

We already have massive inflation thanks to shutting down the economy during the pandemic (and at the same time pumping many many Billions into it), so what are the idiots doing now ? Pumping even more money into it !
What they are doing is madness.

Basically the economy had a big (enforced) holiday during the pandemic and society has to suffer for that, but it has not so far. All this money they are spending is just putting off the evil day, and making it even worse when it comes......

 

[Newchodge]

Can anyone explain the logic that ordinary people get a 1p cut off income tax rates, but really big earners get 5p off?