Genuinely not to understand the government's economic policy

[Thisishowyoudisappear]

This is a genuine question, I'm not trying to start a political argument. For the record I am fairly left wing.

So GO says the govt needs to make huge cuts in order to reduce the deficit. The cuts are going to be made at least in part from 'welfare'.

I guess I am wondering what all this deficit cutting is supposed to be achieving. I don't know, in real life, anybody who's been made better off under this govt. I don't understand this idea that 'balancing the books' for the whole economy a)bears any resemblance to doing same for a household or small business; b)is doing anything for the vast majority of people.

I don't understand how 'welfare' can be cut much more without starting on pensioners, which surely isn't going to happen.

I also don't understand why anyone except the seriously well-off vote Conservative. Why would you, when they are cutting services and not giving anything in tax cuts or whatever? Genuine question again.

I'm intelligent and take more than a passing interest in politics. So AIBU (or just a bit dim) or what??

Don't feel bad... the government don't understand it either :)

WRT tax (I studied tax law so have some knowledge on this - oh how exciting I am ), if the government hit businesses with massive taxes they divert profits out of the UK (not much UK can do about that). I won't bore everyone with the legalities of it but closing the loopholes isn't always the best option and a lot of anti tax avoidance laws have been brought in under this goverment.

I really do disagree about WTC and CTC though. IMO it is better to have 2 people doing a job each at £5/hour topped up by WTC than 1 person doing a job at £10/hour and the other on JSA.

Reasons for this include:

• business will pay two lots of employers NI
• both employees (theoretically) can pay into employer supported pension
• prospect for promotion for both employees (could in future make £15/hour)
• businesses will be encouraged to manufacture in UK because of cheaper labour for them which encourages more jobs and also more UK a profits which = more corporation tax
• better quality of life for people as theoretically a company can employ more people so less pressure on individuals to work extra hard
• more unskilled jobs so everyone has a fair chance at working (not just people with lots of quals)

Tsk tsk. Terrible misunderstanding here - the current government are enforcing cuts in public services .. and subsidising businesses to keep wages low.. and allowing privately owned utilities to profiteer and raise living cost.. have increased both the cost and qualification time for employees to challenge their employers and are also aiming to take away the safety net of welfare from as many people as possible. This all contributes to reduced productivity and economic capacity for the lowest paid.. and by that i mean lower than 'average' if average pay only just covers living expenses.. as it does .now.. there is little spare cash for consumers to exercise choice and/or buy more than the basics. When this is put against a backdrop of reduced personal borrowing (or more accurately increased high interest borrowing) there is so little money around that things increasingly stagnate. The incentives for businesses to pay low wages (zero hours contracts, working tax credits, apprentice schemes, reduced possibility for ET challenge) need to be eliminated to allow upward pressure on wages to allow more choice and spending in the economy to encourage innovation and improve both self-esteem and productivity. At the moment there are so many pressures and incentives to reduce wages and keep profits especially when tax can be almost completely avoided we aren't going to get out of this with a pro-business, dangerously class-entrenched party whose core voters went to school in the 50s.

But not everyone is entitled to WTC. So these people lose out again and again. Doing the same job but for less money because their colleagues on the WTC will be getting more.

Given that I work with utility companies I can assure you there are pretty stringent caps on the profits they can make .

Upward pressure on wages? Well yes that would be nice but I'm afraid that won't solve anything!

Yes sorry I should clarify that my previous post meant that more people should be eligible for WTC (lower paid workers that is).

It's an accounting argument. The threat is supposed to be the impossibility of paying interest and making the repayments on government debt. But, there are really two solutions. (a) spend your way to a stronger economy (b) cut spending to the bone and reduce the debt.

George tried (b) it worked for a while. The debt went down. Then it stopped working and it's gone up again. The real problem is that George is an idiot. It's got nothing to do with the economy.

I'm afraid I just don't get this Labour solution of spending your way out of debt.

It doesn't always work. It's Keynesian economics and basically hinges upon the fact that you're flushing money around the economy like clothes in a spin dryer. Of course you have to make sure that the money stays in there and the little buggers called the public don't try saving any of it.

Actually Fluffy, I do understand the difference between debt and deficit, and they've both got worse under this government. Also, government debt to GDP has gone up, from 63% in 2010 to over 75% now. What no mainstream economics publication is highlighting is personal debt to earnings, which has shot up to around 160%. People on low wages are using payday loans and credit cards to pay for essentials such as rent, food and fuel. Google (other search engines are available) Steve Kean from Kingston University to get an oversight as to why it's important to take personal debt into account.

We have a consumer led economy which is seeing much of it being reduced due to this government cutting to those who spend the most as a percentage of their income.

The reason I want tax rises is that we currently spend around £90bn pa more than we take in.

This gets added to our existing pot of debt and we have to pay interest on it. At the last count the interest bill was £53bn.

We have a big demographic problem coming up with the baby boomers retiring. All things being equal we should have a massive surplus to cover the extra costs this will bring.

We need to start bringing in more in tax than we spend on health care, pensions education etc...

I don't see how we can close the gap with cuts.

Possibly if we savagely cut pensioner benefits and reduce what the NHS offers as well as reducing working age benefits we'd get close but it would mean cutting state pensions in half. I don't think this is realistic or good for the country.

We therefore will need tax rises. Where should these fall? My preferred area would be unearned income and wealth - IHT, CGT, NI on pension income (final salary pensions were not typically paid for or at least not fully paid for). If not there then it'll have to be income tax, VAT etc...

It will hurt but it needs doing. The longer we delay, the worse it'll have to be.

Then I don't understand what you're getting at RE the national debt? What do you expect them to do? Slash spending so much we no longer run a deficit?

You do realise labour have openly admitted that the deficit/national debt would have been higher if they'd been in power?

I agree with you re the personal debt thing. Unfortunately the government (and some on the general public) seem to think people with CC debt spent it on clothes and TVs not essential expenditure.

It would probably work if we stopped spending anything, on anything, today. There you go, George.

I think Angela Merkel pulled a similar stunt on the Greeks. Maybe George should invite her over to stay.

I think that nobody understands it because we don't have all the information at our fingertips.

is eye opening, and gives a lot of food for thought.

I also need to read up on all this however, it seems to me that the problem is that no one will vote for anyone who raises taxes and people hold their hands up in horror but the services we all expect: education, health, pensions, benefits etc cost money and are not ever free. No one wants cuts yet no one wants to pay so old labour stopped talking about taxes and gave us good services courtesy of lucky growth and unsustainable financially. the recession cut into this and now the conservatives ideology (and probably new labours) is not to tax but to cut so those services are being cut and general well being of those unable to pay will suffer though they will have more money to buy their kids a new games console.

I would prefer to be financially poor but with an excellent sustainable welfare state so that my health and education are good. Maybe this is too simplistic but that's what I think is wrong and I need to find out if Im right before I have to vote. Then I have to decide who can give me that if I'm right. I think immigration is a massive red herring which diverts us from what matters.

The system is broken.

Tories gave out tax breaks to their friends in the top 1% when they got in, to do what with? buy more property?

They have continued to refuse to go after the banks, bonus's still paid for failures, no restitution for the banking crisis.

Refuse to sort of the tax fiasco where multi-billion companies pay less tax than I do!

Any system with politicians in it will be broken, by definition.

DoraGora It's only a matter of time before saving too much gets you an ASBO because penally low rates of interest aren't doing the business. Thrift is being punished.

from the Autumn statement: Britain awarded the lead role in the international effort to explore Mars

Well, I would scrap this for a start.

I think George is broadly on the right track. The plan isn't being especially well executed - but IMO he's getting more right than wrong. Given that this is a parents' forum I'm surprised that most people aren't against the principle of incurring ever-more debt that our children will have to pay off.

One of the only (financial) Tory policies I struggle to reconcile is IHT. Were it up to me, this would be levied at a much higher rate than it currently is and I say this as a likely benificiary

There are some things that the government could do on the welfare front which would amount to tolkenism - but at least send out a clear message.

For me personally, I'd like to see a teired benefit system that recognised (to a greater extent than it does presently) contributions made into the system.

"I guess I am wondering what all this deficit cutting is supposed to be achieving. I don't know, in real life, anybody who's been made better off under this govt."

This the nub of it.

If the government borrows money either to pay for services, or so the tax rate can be lower than it would otherwise need to be, then everyone now could in theory be immediately and presently better off.

It's our future selves or future generations who lose out.

They either have to pay more tax to pay it back (or just to service the interest), or suffer lower levels of public spending, or choose to borrow loads themselves and pass the problem forward.

Obviously you can't just borrow what you want and keep passing it on forever. At some point the market would stop lending it, and your country could go bust. Well before that your interest rates would go up and the whole thing just gets a bit painful (the market demands higher rates when they see a death spiral or default or hyper inflation as even remotely probable).

People argue about how much borrowing is too much. Personally, I prefer the Norwegian model. They put loads of their North Sea oil bonanza into a sovereign wealth fund. They're fucking sorted. The UK pissed ours up the wall, and also borrowed so much over the years that I believe the total income from UK council tax just about pays the interest on the national debt.

Imagine if you didn't have to pay council tax? How nice would that be? Well, we're still borrowing more than double that raised by council tax, so they could triple council tax and we still couldn't balance the books - we'd still have to borrow from our childrens' taxes.

I think Russell Brand may have advocated just cancelling the debt. A fine idea. Unless you have a pension fund and don't fancy that also being cancelled. And unless you like buying products in UK shops that are imported using British Pounds that overseas markets like to believe have some sort of value. For example.

That aside, it's really a question of whether we sacrifice our living standards by x% now, or leave that obligation to our future selves or children, who would have to cut their living standards by y%. And whether x>y or x

They can afford to cut the top rate of tax though, right? They can oppose things like a mansion tax and want to raise the inheritance tax threshold? If they are whittling off a few quid here and there on people's ESA etc , I'd feel better about it if the much better off were having a few cuts to take too. And less interference with the housing market.

Actually I don't mind paying council tax. I think it is something of a leveller and reminds us that we all depend on public services.

I was surprised to find myself agreeing with Margaret Thatcher in the Iron Lady film when she said to the Cabinet that everyone should pay something (obviously I didn't agree re the poll tax!).