Which taxes should Burnham put up?

Wealth tax off the agenda? Sigh. He's going to be another Starmer. They’ve got to him already, the right wing of the party. After all that election fuss. So just regionalism, then, whatever that is. Sigh again.

I am disappointed about the rumours in the press he is appointing Mahmood.
Mumsnet isn’t a good place to discuss taxes these days. A number of bots and plenty of people who’ll lobby for the richer people in society, plus Reform members.

Here's Jonathan Portes saying some of this on Sky News. I believe he is currently Professor of Economics and Public Policy at King's College London, but was previously a civil servant, Chief Economist and Director of Welfare to Work at the DWP, commenting on a snapshot in time perspective on welfare costs. Factually, he isn't wrong depending on what figures you use for welfare. Strip out pensions and look just at working age benefits, and things might look a bit rosier. Add pensions and health-related benefits, and the picture changes again, because an ageing population pushes costs and the direction of travel for those costs irrespective of who's in power.

I don't know what you mean by a snapshot in time perspective on welfare costs? He's comparing welfare spending as a percentage of national income across 5 decades and pointing out that it has remained almost totally unchanged according to the government's own statistics (which compare like for like to the extent that that's possible). As far as I'm aware these overall statistics include state pensions and health related benefits if you mean disability benefits but not the NHS. And yes, while some of these individual areas of welfare spending have gone up (notably pension spending massively), because there have been cuts to other areas of welfare, there has been no overall rise. So it's totally misleading to say that welfare spending is "ballooning" when it isn't even rising.

The stat is also doing an awful lot of heavy lifting. All it really tells you is where welfare spending is today. It tells you nothing about whether that level is appropriate, affordable or sustainable, where the money will come from, how efficiently it's being spent, the demographics, how fair the financial burden to pay for it all will be spread and so on. It certainly doesn't tell you whether we are heading towards a cliff edge or if whoever is in power has the skills to steer us back onto a financially sustainable path

It tells us a lot more than where welfare spending is today - it tells us that it is today more or less exactly where it has been for 5 decades and that the government have, rightly or wrongly, put huge efforts into keeping it that way. I haven't argued anything beyond pointing out that the repeated assertions that it's spiralling are false. That the need for greater welfare spending is another matter.

Sustainability is about addressing known and predictable long term challenges before they become crises, not waiting until you are forced to ask, "Where is the money going to come from?" Which is currently where we are with the state pension. The birth rate started falling c1965. Successive administrations have had decades to plan and deal with it but they chose to kick the can down the road rather than make the medium and long term changes needed to keep it sustainable and reduce dependency on the state.

Successive governments have been addressing the situation - they've done all sorts of things eg, they've increased the pension age, enforced laws to ensure employers contribute higher amounts to pensions, encouraged the provision of greater private provision. Whether or not it's to anyone's satisfaction is another matter but they've made and are continuing to make many efforts to address the situation. They've also reduced various areas of working age welfare so more can be spent on pensions.

As for Novara Media, that bastion of neutrality... It's openly on the left, so it's hardly surprising that they selected a carefully curated clip.

I know nothing about NovaraMedia but the clip appears to be an unedited segment from Sky News in which an economic expert who has worked for the government corrects the incorrect assertion that welfare costs are spiralling. I think it stands alone as a source regardless of who posted it.

TLDR: You may not like the use of the word "ballooning", but welfare spending is rising and, on the current trajectory, it is not sustainable. A snapshot taken out of context is no substitute for robust, sustainable medium and long term planning.

You acknowledged yourself that it isn't ballooning where you said that Factually, he isn't wrong depending on what figures you use for welfare. Given you haven't provided sources for any alternative comparisons it's hard to determine the basis on which you're still trying to argue that spending is in fact ballooning. I will look at them if you have them though? The source I provided isn't any sort of snapshot taken out of context. It's an economic expert who has studied the government data over the last 5 decades and is confidently asserting that they show that welfare spending is not spiralling.

Where we maybe agree is that there is and will continue to be rising pressure for more welfare spending and yes, that is a massive problem that needs to be solved. We won't solve it by repeatedly misrepresenting it though as the government seems insistent on doing.

Here's Jonathan Portes saying some of this on Sky News. I believe he is currently Professor of Economics and Public Policy at King's College London, but was previously a civil servant, Chief Economist and Director of Welfare to Work at the DWP, commenting on a snapshot in time perspective on welfare costs. Factually, he isn't wrong depending on what figures you use for welfare. Strip out pensions and look just at working age benefits, and things might look a bit rosier. Add pensions and health-related benefits, and the picture changes again, because an ageing population pushes costs and the direction of travel for those costs irrespective of who's in power.

The stat is also doing an awful lot of heavy lifting. All it really tells you is where welfare spending is today. It tells you nothing about whether that level is appropriate, affordable or sustainable, where the money will come from, how efficiently it's being spent, the demographics, how fair the financial burden to pay for it all will be spread and so on. It certainly doesn't tell you whether we are heading towards a cliff edge or if whoever is in power has the skills to steer us back onto a financially sustainable path

Sustainability is about addressing known and predictable long term challenges before they become crises, not waiting until you are forced to ask, "Where is the money going to come from?" Which is currently where we are with the state pension. The birth rate started falling c1965. Successive administrations have had decades to plan and deal with it but they chose to kick the can down the road rather than make the medium and long term changes needed to keep it sustainable and reduce dependency on the state.

As for Novara Media, that bastion of neutrality... It's openly on the left, so it's hardly surprising that they selected a carefully curated clip.

TLDR: You may not like the use of the word "ballooning", but welfare spending is rising and, on the current trajectory, it is not sustainable. A snapshot taken out of context is no substitute for robust, sustainable medium and long term planning.

But the welfare bill isn't ballooning. As a percentage of GDP, which is generally considered the best way to measure such changes over time, it's the same as it was in 2010 under austerity and more or less identical to what it was under Thatcher in the 80s. Some aspects of it are going up, yes, but some aspects are going down so overall it's remained unchanged for decades. We're misled with constant talk of monetary figures which obscure inflation and also the fact that we're living through enormous population growth (and therefore growth of total GDP and every monetary spending figure).

Here's Jonathan Portes saying some of this on Skye News- I believe he is currently Professor of Economics and Public Policy at King’s College London but was previously a civil servant and chief economist and director of welfare to work at the DWP.

https://www.instagram.com/reels/DaU85JgGC3E/

But very few, if any, have explained in detail how they would work. The only way such a tax would work is if it were global and all countries signed up to it.

I think governments are to blame for poverty, not rich people.

I haven't seen the Gary Stevenson documentary yet. I have to say he doesn't come across well in debate (think I saw that thing with Daniel Priestley). However, there are plenty of very well respected economists who also advocate for wealth taxes.

The Gary Stevenson documentary was not a good documentary. He is not an ‘economist’ as he claims to be and appears to have grown a following among people who have a similarly poor understanding of how economies work.

Im just listening to an old episode of Diary of a CEO where he debates an entrepreneur, Daniel Priestley and it’s embarrassing to hear his naivety on display. He means well but he needs to educate himself.

Removing the indexation from CGT means that people are taxed on something they don’t control - inflation.

Bit like freezing the personal allowance threshold at £12570 since 2021. Add inflation, it should be about £15880. So, people are effectively paying 20% on the difference. Roughly £55 per month.

Nail on the head. We used to have "relief" for the time over which people owned the asset, firstly indexation relief based on general inflation and then it was changed to taper relief based on years owned. The reduction in CGT rates was to compensate for the loss of such reliefs. If people want CGT rates as high as income tax rates, then we need to have some kind of relief for indexation and/or time again. People need to look at the bigger picture and start to actually bother understanding taxes rather than spouting off on a tangent when they really don't know what they're talking about.

Yep, imagine you invested £100k in a business in 1980 and was selling the business now for £500k. You have made £400K 'profit' right? Except inflation means that the £100k in 1980 was the equivalent of £550k today so actually you've made a loss in real terms. You can buy less things with your £500k today than you could buy with your £100k all those years ago.

I think people always struggle to really comprehend this. Currently you would still be paying a decent chunk of CGT on this 'gain' which is obviously actually a loss in real terms. Asking someone to pay almost half of the money to the taxman though, would obviously make the loss far worse and would seriously discourage anyone making any kind of long term investments in anything. Is this really what we want?

How much do you think it will cost to automate.....
I dont disagree but it does cost....

Agree in theory but also think about what % of appointments are for patients who can do neither / aging population

The thing with CGT is that it is a lower rate to acknowledge that there's no longer any form of accounting for general inflation over the time you own the asset. Go back 2/3/4 decades and you had indexation allowance which reflected the time that you held the asset, which was then scrapped and replaced with taper relief, which was a yearly reduction, again to reflect the time you owned the asset. That was then scrapped and CGT rates reduced instead. I'd be all for reverting CGT rates back to higher levels, but you do need some kind of adjustment for length of time you've owned it. It's clearly wrong when someone who has owned an asset for a year pays the same CGT as someone who's owned an asset for 50 years, if the "basic" simple gain in the same. There has to be some kind of time apportionment of the gain.

This.
Surely no reasonable person can object to some benefits being means tested provided the threshold is set at a reasonable level. And means should include assets.
Yes increase CGT to basic rate and index link the threshold.
And revert the pension triple lock to a double lock (uprating by the higher of earnings or CPI). And I speak as a new retiree.

Yes this thread mirrors Labour - every meeting is how can we tax more.

‘Every meeting I have is “who can we tax in order to pay benefits to others”.

I don’t think they can switch from this ethos but at some point they’ll be out due to it.

Reducing the VAT threshold will do untold damage to the economy as lots of small businesses will become unviable overnight. If it were £40k, what about the business currently doing £45k of turnover - they'd be out of pocket so would do the same at those at £90k and cut down their working to get back under £40k - or more likely just give up altogether.

But it is a Labour government of hate, spite and envy, so I wouldn't be surprised if they did it!

Yes, other EU countries have much lower VAT registration thresholds, but they were set up like that decades ago generally, so no one knows any difference and businesses have been set up for decades on that basis. It's not something you can retro-implement.

These arbitrary thresholds are very damaging as they put the brake on growth and a reduction would put growth into reverse.

In fact, if anything, I'd go for a zero threshold, and make every single business register for VAT from their first £1 of turnover. Then at least you'd have a level playing field, no competition from smaller non vat registered businesses, and more importantly no barriers to growth.

But there's also have to be a proper clampdown on the black economy as any reduction of VAT threshold (or a zero threshold) would massively fuel undeclared cash in hand sales, artificial business splitting, etc., which HMRC is currently incapable of tackling despite it already costing tens of billions each year and the largest component of the official tax gap.

"Britain's main disability benefit is 'not fit for purpose' and deters people from taking up work, a government review has found."

The irony is that the party responsible for creating the modern welfare state now seems determined to tax it into oblivion to pay for a ballooning welfare bill.

"The plan for Social Security is put forward as part of a comprehensive policy of social progress. The State in organising security should not stifle incentive, opportunity or responsibility. In establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family."

William Beveridge, the architect of the modern welfare state

Seems to me that Labour have decided welfare should be a lifestyle and that renting from a corporate landlord or the state and £39k is the "more" that people who don't want to be on welfare should accept. Anyone who wants more than this is selfish and tax is the tool that will remind them to know their place. Large corporates and super rich meanwhile can continue their power and money grab unchallenged,

Actually Government debt acts as a brake on economic growth. Previous Governments (Conservative and Labour) increased Government debt, especially since 1997, to increase spending because it's a lot more electorally popular than increasing taxation. And besides if you are only in power for 5 year terms who cares if increasing debt creates a burden for future generations!

Unfortunately (as Liz Truss found out the hard way) significant debt increases are no longer an option.

The interest on the existing debt is now more than the entire education budget, meaning that the Government has to either increase debt or raise taxation just to pay the growing interest bill. Meaning less money is available for value adding parts of the economy such as education.

I think, apropos of the comment I made yesterday about Slovakia's approach to reducing the cost of benefits, that the idea of a ceiling of 95% of whatever index measure chosen (average wage growth, RPI/CPI or a fixed percentage) applied to all routine benefit uplifts would limit the rate of burden increase without claimants being able to scream about unfairness.

Britain’s main disability benefit is “not fit for purpose” and deters people from taking up work, a government review has found.

A report by Sir Stephen Timms, the social security minister, said Personal Independence Payments (PIP) were not working “as intended”.

It warned the spiralling cost of the handouts, set to hit £41bn at the end of the decade, was causing public support for the welfare state to crumble, but did not propose ways to find savings.

the whole economy is all financed by debt because if it was based on true value of what society could afford society would grow alot slower overall and progress would be slower etc

I also think politicians should stop this tendency to act like certain problems don’t exist, even when they are really expensive. E.g. covid (not lockdowns, which is a different problem). Long covid is estimated to cost £12bn a year now, which will obviously only increase with every round. There are lots of examples where subjects seem taboo and issues are pushed further and further into the future to deal with at a much higher cost.

It feels like the country is held up with sellotape and will take a long time to start to fix. In the meantime, people are getting squeezed more and more, the most vulnerable are getting demonised, misinformation is high and goodness knows what the answer is.

thats the thing it soon will be just the big chains if not already, the traditional high street model is outdated overall

Well you clearly have never run a restaurant! Profit margins are low. More if the owner is also the chef, but once you are employing staff, the margins are really tight. Businesss like this can provide an income for multiple people but with low VAT thresholds theres no incentive to grow and thrive. This means fewer jobs and less growth.
If you make it so only huge chains can be viable, there goes our high street independent shops, cafes and restaurants. Is that the goal? I hope not.