The rising cost of living

[foreveryoung]

So when we are all skint cause the BOE increase the interest rate to 6-7-8%, an we stop spending so much, it's time for one of those parties at Number 10, cause inflation will start falling. What about the bankers, will they be all rich again, due to our £350 tracker mortgages having risen to £1350 a month.

I think the BOE and Government are kidding themselves that we can do this without a deep recession. I doubt even this rise in interest rates to 5% are going to make much difference, the country has changed from when we could cut out the luxuries, they are now a requirement, even if people are skint.

They need another plan!

[CVByrne]

3 minutes ago, sidcow said:

A message for all you brexiteers out there. 

Suck up your higher mortgage and rent costs. 

I hope all the Brexiteers suffer the most. They all need to know there was consequences we all suffer for their stupidity. 

It's nonsense though to put the whole inflation blame as if it's solely down to Brexit. The primary cause for the UK having higher inflation than other G7 countries however is down to Brexit factors. 

The othe three factors are driving inflation here as much as elsewhere. 

[Panto_Villan]

Read an article today pointing out it would be a lot more efficient for the Treasury to put up taxes than for the Bank to keep raising interest rates.

The number of households with mortgages in this country is surprisingly small (something like 30%) and the number of variable rate mortgages is also much lower than it used to be, which means the pain of the interest rate rises is being felt much more narrowly than the pain of tax rises would.

[CVByrne]

3 minutes ago, Panto_Villan said:

Read an article today pointing out it would be a lot more efficient for the Treasury to put up taxes than for the Bank to keep raising interest rates.

The number of households with mortgages in this country is surprisingly small (something like 30%) and the number of variable rate mortgages is also much lower than it used to be, which means the pain of the interest rate rises is being felt much more narrowly than the pain of tax rises would.

Definitely agree tax increases is a more effective way to curb inflation. Also would mean we can use the taxes for targeted support for those struggling the most.

Tax increases as a flat % like a levy on all income would have an impact on salaried employees.

It would not hit those whose wealth is in assets. Those assets are sensitive to interest rates. Also businesses are a key spender and they wouldn't be hit by this. They too are sensitive to interest rates as nearly all companies have debt.

So a mix of interest rate rises and tax rises would work but you'd then disproportionately hit middle income earners with mortgages. 

It's complicated. But if you were willing to do it. It would certainly be effective for sure

[bickster]

1 minute ago, CVByrne said:

It wasn't though, it was a calculated gamble by David Cameron to win an internal struggle in the Tory party. When he lost the Tory party battled with itself to decide how it was going to end. All safe because the most unelectable party leader in the history of the state in Jeremy Corbyn meant there was no alternative to stop them

Michael Foot holds that honour not Corbyn

[foreveryoung]

To me, all this technical finance talk is bullshit anyway, its just what the bankers tell us. In the end interest rises are just to cover the national debt, money the Tories have squandered over the last few years. 

[Marka Ragnos]

26 minutes ago, chrisp65 said:

Would it be more democratic if 40% could stop the will of 60%?

 

Probably not. It depends on what it is. But 51% seems too small a majority for such a major change. Is there something about the Referendum Act I don't seem to grasp?

[CVByrne]

11 minutes ago, foreveryoung said:

To me, all this technical finance talk is bullshit anyway, its just what the bankers tell us. In the end interest rises are just to cover the national debt, money the Tories have squandered over the last few years. 

Even the simplest grasp on how anything works you would know how ridiculous this sentence is. Higher interest rates means the interest payments the government pay (ie our tax money) go up. It's not like the Government are lending people the money and they are pocketing the interest. 

[chrisp65]

3 minutes ago, Marka Ragnos said:

Probably not. It depends on what it is. But 51% seems too small a majority for such a major change. Is there something about the Referendum Act I don't seem to grasp?

It was won by over 1.2 million votes on a simple majority vote so that’s pretty clear.

Trouble is, there are so many other ways it could be unfair, but with an even larger majority. What if absolutely everyone in England voted leave and absolutely everyone in Scotland voted remain - having previously been told not to vote for independence as the only way to stay in the EU was to stay in the UK?

It’s why referenda are so rarely used.

[sharkyvilla]

11 minutes ago, Marka Ragnos said:

Probably not. It depends on what it is. But 51% seems too small a majority for such a major change. Is there something about the Referendum Act I don't seem to grasp?

For me it hinges on the question itself, some of them are more black and white than others.  The Brexit one was just a clusterfudge all round because nobody knew what leaving really meant.  A Scottish referendum would probably also be similar because there are major factors for example the currency or joining the EU that would likely be up in the air.  The one they did on FPTP vs AV was better because it was two clear options.

Edited June 22, 2023 by sharkyvilla

[Panto_Villan]

54 minutes ago, CVByrne said:

Definitely agree tax increases is a more effective way to curb inflation. Also would mean we can use the taxes for targeted support for those struggling the most.

Tax increases as a flat % like a levy on all income would have an impact on salaried employees.

It would not hit those whose wealth is in assets. Those assets are sensitive to interest rates. Also businesses are a key spender and they wouldn't be hit by this. They too are sensitive to interest rates as nearly all companies have debt.

So a mix of interest rate rises and tax rises would work but you'd then disproportionately hit middle income earners with mortgages. 

It's complicated. But if you were willing to do it. It would certainly be effective for sure

People who have their wealth in assets tend to derive income from it though, so they’re likely to be hit by tax rises too. And if they’re not earning income from it, they’re unlikely to be contributing to inflation by spending their wealth.

It hits everyone far more evenly than interest rate rises, which actually benefit people who have wealth but no mortgage.

Your point about corporate debt is a fair point, but there’s no reason you couldn’t also put up corporate taxes too.

[Marka Ragnos]

17 minutes ago, chrisp65 said:

It was won by over 1.2 million votes on a simple majority vote so that’s pretty clear.

Trouble is, there are so many other ways it could be unfair, but with an even larger majority. What if absolutely everyone in England voted leave and absolutely everyone in Scotland voted remain - having previously been told not to vote for independence as the only way to stay in the EU was to stay in the UK?

It’s why referenda are so rarely used.

Great points. But people are stupid, too. I live in a place where 40% of citizens believe dinosaurs and humans co-existed. Direct democracy can be scary because it's so powerful and potentially damaging -- and you can't just vote the person out. I just think a referendum asks too much of people because we're so easily manipulated by special interest groups, you know?  Moderators! Sorry, way off topic here!!!!!

Edited June 22, 2023 by Marka Ragnos

[CVByrne]

12 minutes ago, Panto_Villan said:

People who have their wealth in assets tend to derive income from it though, so they’re likely to be hit by tax rises too. And if they’re not earning income from it, they’re unlikely to be contributing to inflation by spending their wealth.

It hits everyone far more evenly than interest rate rises, which actually benefit people who have wealth but no mortgage.

Your point about corporate debt is a fair point, but there’s no reason you couldn’t also put up corporate taxes too.

Well not really, they they get lines of credit against their assets. So their assets rise in value more than servicing the "debt" they hold against it. So only interest rates actually hit the wealthy. 

People who pay income tax are us normal people. The real rich don't pay any tax as they don't pay capital gains as they never sell the assets. 

I've said this many times in many a discussion. We have to primarily tax wealth not income. 

[Panto_Villan]

21 minutes ago, CVByrne said:

Well not really, they they get lines of credit against their assets. So their assets rise in value more than servicing the "debt" they hold against it. So only interest rates actually hit the wealthy. 

People who pay income tax are us normal people. The real rich don't pay any tax as they don't pay capital gains as they never sell the assets. 

I've said this many times in many a discussion. We have to primarily tax wealth not income. 

It depends what you mean by the “rich” imo. People who are worth a million or two, with most of it locked up in their house and the rest in a pension and / or share portfolio, don’t get credit lines against their wealth. I’d class them as rich.

The sort of people that do get credit lines don’t exist in large enough numbers to affect inflation one way or another. Those are the £5m+ people, who I would put in a different category altogether.

[foreveryoung]

1 hour ago, CVByrne said:

Even the simplest grasp on how anything works you would know how ridiculous this sentence is. Higher interest rates means the interest payments the government pay (ie our tax money) go up. It's not like the Government are lending people the money and they are pocketing the interest. 

But they pocket the extra taxes from banks making more profit due to the interest rate rises, so possibly don't cost the government f*** all!

[Genie]

1 minute ago, foreveryoung said:

But they pocket the extra taxes from banks making more profit due to the interest rate rises, so possibly don't cost the government f*** all!

A while back it was revealed the UK was paying £20b per month in interest on its loans. We’ve had several interest rises since. I don’t think tax on banks profits will compare.

[Panto_Villan]

4 minutes ago, foreveryoung said:

But they pocket the extra taxes from banks making more profit due to the interest rate rises, so possibly don't cost the government f*** all!

Yeah, and crushing the economy means that many other types of business do worse, which means they pay less tax. It’s a huge net loss for the government.

[sidcow]

National Debt exceeded 100% of UK GDP this week for the first time since the 1960's, a time when we were still knee deep in War debt. 

Our interest payments must be eye watering. 

[CVByrne]

11 minutes ago, foreveryoung said:

But they pocket the extra taxes from banks making more profit due to the interest rate rises, so possibly don't cost the government f*** all!

You seem obsessed with Banks for some reason. I assume it was because of the 2008 financial crisis which was a banking crisis.

This is a cost of living problem. The Bank of England sets the interest rates and loans to the Banks and they loan to people for mortgages. So when the interest rate goes up from the Bank of England the interest rate goes up for the banks AND the people and companies they loan to. 

It's not like the banks themselves are just raising interest rates and just pocketing it all. That's not how it works. Banks are funded by loans from the central bank. When the interest rate on their loans goes up they pass on the increase in to customers.

 

[CVByrne]

21 minutes ago, Panto_Villan said:

It depends what you mean by the “rich” imo. People who are worth a million or two, with most of it locked up in their house and the rest in a pension and / or share portfolio, don’t get credit lines against their wealth. I’d class them as rich.

The sort of people that do get credit lines don’t exist in large enough numbers to affect inflation one way or another. Those are the £5m+ people, who I would put in a different category altogether.

Fair point in relation to inflation, it's not that it will make a difference for those people to the overall inflation. It was more in relation to income tax increases instead of interest rate increases means they take zero burden at all. They're basically exempt from any pain.

Also the 30% or whatever of people who own homes as a group are already the better off people in society as they own a leveraged asset that increases in value over time. So mortgage increases while painful is not like rent increases for people who have no assets.