There *is* a magic money tree though isn't there?

[Rollindownriviera]

And we've been living off it these last twenty years.

When Labour brought in tax credits it was "to make work pay for hard-working families". But actually all it meant was that employers could pay less in wages while there was still plenty of money swilling around to put towards buying things. No matter that this is money not generated by any activity other than collecting tax and giving it out to folks every year: it's there and you can spend it. Then things semi collapsed in 2008 so the Tories' answer was just to print more. As well as keeping on recycling tax take to prop up poor earnings.

So we've all been living off the magic money tree a long time. Not just the people claiming the £38bn of in work benefits every year, but also everyone who sells anything to them ie every person involved in economic activity.

Looks like it's set to stop now, maybe, but it's been a magic money tree. Hasn't it?

There certainly seems to have been one during covid, with all the grants and furlough schemes!

Not too many checks or restrictions either 😉

Seems to be a forest of money trees for Tory party donors certainly.

Poverty for an increasing number to come.

The 4% hit from Brexit will make covid look like a small blip. Brexit has made us all a lot poorer, thanks to all who lied about it and all who fell for it.

Ach - I am not a fan of Boris but the furlough scheme has helped many & it has been an unprecedented crisis. If any have taken advantage of it improperly - shame on them.

@BasiliskStare

Ach - I am not a fan of Boris but the furlough scheme has helped many & it has been an unprecedented crisis. If any have taken advantage of it improperly - shame on them.

The UK scheme was open to fraud because it was designed in a rush due to no pandemic preparedness. The German scheme was designed years ago and left on the shelf.

The UK scheme was very expensive and poorly targeted. Wasteful of our money and didn't help 3m people at all.

Working tax credits were always a stupid idea. The minimum wage should have been raised high enough. WTC just allowed companies to pay people too little. It was open ended, unbudgeted and will take a decade to wean people & companies off.

Furlough was unbudgeted but a response to a specific time-limited emergency (the time it took to vaccinate 80% of the working population). The alternative was 30% unemployment, social services being unable to cope, people genuinely at risk of starving, companies losing their skilled workforces and all the resulting long term economic damage.

I think history will judge the furlough scheme a high-point in British social politics (and yes I know there were some people who fell through the cracks). The economy has bounced back relatively well.

Covid isn't over yet so still time for things to change.

@MintJulia "I think history will judge the furlough scheme a high-point in British social politics (and yes I know there were some people who fell through the cracks). "

Although I am not a fan of Boris - yes however ill planned - they did it - now I have no knowledge of how well planned Germany was etc - but this Government ploughed a whole load of money into making sure most or many people did not lose their jobs . There are so many other things I can criticise them for , but they spent money when it was needed.

We will be paying for that for a long time to come so that is where I want to see. But I have voted all ways - I am not a tribal voter. But what I do not like is armchair generals in a crisis who do not come up with better ideas and snipe from the sidelines.

Were it my glorious reign , I would have had a coalition committee , so that all sides would have had to come up with ideas and agree, But last time I looked it was not my glorious reign.

There is if you're a personal mate of a key Tory-a whole bloody forest, in fact.

There is no magic money tree.

We live on what we produce, which in a country like the UK is, fortunately, quite a lot.

What we can do very effectively is shuffle money around, from different people, and different generations.

In 2008, we bailed out the asset rich and wealthy bankers by massively increased debt (taking from future generations) and increased taxes on the working middle classes. (I have always been amazed that there was not more outcry over this).

In COVID, we again taxed the middle classes, both through direct taxes, and now inflation, and again increased debt.

For a couple of relatively successful teachers or NHS workers, on a combined salary of £100k, they are, in real terms, considerably poorer than they were in 2007. For those with a large house or substantial stock market investments, considerably richer,

If you don’t understand the ‘magic money tree’, it is probably you who are being shaken down.

Yes the magic money flowed into assets enriching the rich and contributing to the crazy house prices. Labour at fault at the time but it's been Tories stoking the gravy train for the last decade.

No matter that this is money not generated by any activity other than collecting tax and giving it out to folks every year: it's there and you can spend it

A huge amount of the money is generated by borrowing, it doesn’t only come from collecting tax.

The magic money tree exists, but you have to pay the money back eventually.

@BigGreen

Yes the magic money flowed into assets enriching the rich and contributing to the crazy house prices. Labour at fault at the time but it's been Tories stoking the gravy train for the last decade.

It goes further back and deeper than that.

The 2008 banking crisis was made worse by the fact that bankers gambled on house prices never dropping. Their bets were massive compared to the value of mortgages that they pushed out.
If they’d stuck to handing out mortgages in a sensible way and had decent protection in place, then the 2008 sub prime crisis wouldn’t have had quite the impact it did.

A few people got filthy rich off of that banking crisis disaster. A few people got filthy rich off of Brexit. A few people got filthy rich off of the covid pandemic.

And we pay the price. Our system is broken, and it goes back further than Labour. You can probably trace it to the start of neo-liberalism.

@LethargicActress,

Or inflate debt away, which raises asset prices but makes anyone on a salary (which does not keep up with inflation) poorer .

Look at what is happening now, inflation as measured could hit 5%, far higher than any pay settlement (bar top earners) and, if we included assets in our inflation measure, would be far higher.

We should be raising interest rates above inflation, but they would never do that, as it would affect asset prices.

At some point (although I have been saying this for years) teachers, nurses etc will realise that they are being fleeced and demand a fair share of the economic growth of the last 50 years, not holding my breath though.

Brexit, contrary to popular opinion on here, has actually given some negotiating power to salaried workers. Prior to Brexit, every time ‘the workers got uppity’, they would be replaced by Eastern European’s, prepared to work for almost nothing. Now they will probably be replaced by robots.

Brexit, contrary to popular opinion on here, has actually given some negotiating power to salaried worker

How? How are workers actually supposed to negotiate? A lot of employers are international and can move operations around. And a lot of smaller ones do not recognise unions, which enable workers to negotiate collectively.

The balance of power remains in those at the top.

Brexit, contrary to popular opinion on here, has actually given some negotiating power to salaried workers. Dream on.

Plus higher wages = inflation if not accompanied by increased productivity.

We will all be poorer due to Brexit.

When Labour brought in tax credits they put NI up for higher earners to help pay for it, I agree it was a stupid idea though.
There's always been a magic money tree for defence.
China owns most of the world financially. Let's hope they don't want their money back soon.

@rrhuth,

Higher wages=inflation seems to be the mantra of the well off, who award themselves monster raises or other forms of incentive. It only seems to apply to their ‘servants’ (cleaners, drivers, factory workers etc). For some magical reason a banker’s bonus of several hundred k, or a private equity manager’s carried interest does not feed into inflation.

As for negotiating power, look at wages in hospitality and driving. They are flying upwards. Even the most ardent anti Brexiteer economist has admitted they are surprised at how much Brexit has added to wages in these factors.

There's always been a magic money tree for defence very true

@TheReluctantPhoenix

No one is denying staff shortages in hospitality are causing wage inflation. We're just aware it is unsustainable and will lead to some businesses going bust.

Working tax credits were always a stupid idea.

Working tax credits in their original planned form were a great idea, especially for women.

They were intended to be a short help, generally around two years or so, to allow people to be able to afford to go back to work after being on benefits without the costs of clothes, travel and childcare making it financially better to be on benefits.

People could take lower paid jobs because of their CV gap (and childcare restrictions) that would in time lead to better paid jobs and no need for the tax credits.

Not foreseeing the boom in zero hours contracts, low pay and the massive increase in the cost of childcare was the downfall.

It was a brilliant idea that was then watered down and watered down until it was a subsidy for the companies rather than individual people.

Of course there’s a magic money tree. Part of the nature of money is that you can make more of it.

There’s a magic money tree if you’re a business owner who is friends with a Tory minister

@rrhuth,

‘Some businesses going bust’ is kind of the point of capitalism!

The idea is that people risk capital in order to make more, but sometimes it goes wrong. The economic cycle was an opportunity for new and young people to get rich out of the ashes of the previous crisis.

Those who invested in the late 70s in houses or properties are now doing very nicely, ditto the early 90s recession (that was me amongst others).

The abolition of the economic cycle by continually pumping money in to keep assets high, and importing cheap labour to support the wealthy, has led to crony capitalism, where the same people and families continue to get richer, and, for those without, or in ‘normal’ jobs, they can never aspire to own a decent house even.

@Duckrace

There is if you're a personal mate of a key Tory-a whole bloody forest, in fact.

I was going to post the same!

I'd love to see the total amount of all the contracts awarded via the "VIP lane". There was a study a while ago that found that 20% of those contracts involved at least one factor that's a red flag for corruption.

It's a bloody disgrace, but when we have a government who is rewarding donors with peerages on a scale to rival Lloyd George, this sort of thing is to be expected imo.