Inflation and interest rates

[Sallywallywoowoo]

The BOE keep raising rates to curb inflation. I understand that is the only thing that the BOE can actually do and so they've got no choice. But isn't there anything else the govt can do? It's genuinely scary seeing articles on the BBC how 1 million mortgage holders will see their payments increase by £500pm by 2026. Literally nobody I know could afford that. And it doesn't even include renters in that number. Presumably loads of them are in the same boat or worse. If their LL mortgage costs go up, then so will their rents.
It seems to me the financial burden could be spread more fairly. Anyone who owns outright isn't feeling the pain. And for the most part that group is likely to be the ones who could most afford it. Especially if they have a load of savings that they're now getting a nice high rate of interest on. Surely things COULD be done differently if the will was there?

I don't think it's fair that workers have stagnant wages but pensioners are protected. Particularly when pension age keeps moving out.

The difference is workers have the opportunity to move to higher paid jobs while pensioners don’t have that choice. All benefits were increased by 10.1% in April, not just pensions. Considering 12.5 million people of working age claim benefits it’s a bit disingenuous to pick on pensioners.

Inheritance tax should be much, much higher - and I say this as someone who is likely to inherit. Everyone loses their parents at some point, but not everyone gets a huge unearned windfall. It creates a lot of inequality in the system as pushes prices up.

the threshold has been frozen since 2009 which has greatly increased the number of estates where tax is due.
if you want to start with tax being paid on unearned windfalls what about cgt on selling primary residences?

But working age benefits are means tested. That's the difference.

And this isn't about benefits, it's about whether it is fair approach to pull fiscal and monetary levers to make some groups poorer but protect others.

But working age benefits are means tested. That's the difference.

And still available to people on far higher income levels than the maximum for a pensioner reliant on a combination of state pension and pension credits.

Increasing inheritance tax just encourages people to spend more which is what the government is trying to avoid.

Too much focus on this thread about interest rates being a blunt tool affecting mortgages. The wider picture is the macroeconomic level. A PP discussed upthread that interest rates have to be higher, otherwise it will have significant impact on our economy, and imports and exports.

As PP says increasing inheritance tax probably means people change their habits and pass that wealth on earlier to their kids tax free, which they could use for a house deposit pushing up prices further. I don't think that's the answer.

Well yeah, because currently pensioners have a triple lock pension and some other universal payments.

But, again, this isn't about pensioners, it's about the govt making active decisions to make some people poorer and insulating others - and this isn't really based on someone's ability to bear these costs.

I'm due to remortgage in 2025 and thankfully (hopefully) we will be well able to cover a higher mortgage rate. But, as an undertaxed director of an Ltd. I would have much preferred to pay more tax last year and not receive any help with energy bills than be in the situation we (as a country) are in now. Instead, I paid low taxes and donated to food banks like a fucking Victorian philanthropist 🙄🙄

I did have a very faint hope that after the Covid lockdowns and huge govt intervention, we might have able to reach some kind of post- crisis consensus and address the shocking levels of inequality in this country. But here we are. Same old, same old.

You'll think it's fair enough when you're a pensioner

It's not the IHT rate that's the problem - 40% is quite high as it is.

The REAL problem are all the exemptions meaning most people don't pay anything at all. It's effectively an exemption on the first £1 million for a couple giving their family home to their children in their will. That's a huge exemption!

Add in all the other exemptions, such as gifts from income, business assets, agricultural assets, works of art, etc etc., and that's even more, potentially huge, wealth exempt from IHT.

With a bit of simple planning, probably 95% of the population are exempt from IHT (maybe higher).

So raising the rate will achieve nothing. In fact, it's probably the high 40% rate that drives people with estates over £1m to take action to avoid IHT via trusts and arranging their affairs to benefit from all the exemptions.

I’m not sure they want recession but they do want wage suppression

Is a recession the only way to get that?

Someone said the other day you need depressing uncertainty, ie don’t give the rise etc

Not sure that’s possible without the depressing reality

Exactly - people already do this but more people would do it.

You can't tax people too much or they will find a way around it - tax planning they call it. It's perfectly legal to gift your children your property while you're still alive so they only have to pay Capital Gains tax on the gift when they eventually sell it, not Inheritance tax.

The REAL problem are all the exemptions meaning most people don't pay anything at all. It's effectively an exemption on the first £1 million for a couple giving their family home to their children in their will. That's a huge exemption!

Add in all the other exemptions, such as gifts from income, business assets, agricultural assets, works of art, etc etc., and that's even more, potentially huge, wealth exempt from IHT.

Yes & it's ridiculous that income tax bands have been frozen.

You'll think it's fair enough when you're a pensioner

I don't think it's fair my pension age has moved out & I won't be relying on a state pension that's for sure.

No but my comment was in reference to your question: Is it fair that a pensioner gets a payment in line with inflation.

I think you will consider it fair when the time comes for you to benefit from it.

You can't tax people too much or they will find a way around it - tax planning they call it. It's perfectly legal to gift your children your property while you're still alive so they only have to pay Capital Gains tax on the gift when they eventually sell it, not Inheritance tax.

But you can put the CGT rate for inherited properties in line with the inheritance tax rate. The govt has been continuously closing tax loopholes since the financial crisis and they can easily go further if they want to.

On the point that you can only push taxpayers so far... I'm actually much more concerned about the number of healthcare and other public sector workers who are leaving their professions/ moving overseas because we refuse to pay them fairly.

*No but my comment was in reference to your question: Is it fair that a pensioner gets a payment in line with inflation.

I think you will consider it fair when the time comes for you to benefit from it.*

Personally, I'm going to do my absolute best not to shit all over generations that come after me. But I appreciate I'm in a minority on that.

So the plebs should work 12 hours a day, 7 days, a week, 52 weeks a year just to scratch an existence while the gentry and elite feast and play?

No thanks, I'll use my spare time to continue to campaign againt greed, selfishness and wealth inequality.

Yes you could do that (make the CGT for property gifts the same as the Inheritance tax rate) but the point remains that you can only push taxpayers so far. The richer people in society paying higher rates of tax will employ tax lawyers to explain the loopholes to them and exploit them, if the tax becomes too onerous. There is a limit to what people will pay.

The richest people already have lawyers to manage their tax affairs.

Is it shitting on the generations that come after you if pensioners are happy to accept payments in line with inflation?

Genuine question - I'm 10 years away from being a pensioner myself.

The IHT threshold of £325k has remained the same since 2009 and the current government has frozen it until 2028. That’s a hell of a long time, particularly since the £ has lost 42% of its value since then.

Not RTFT yet but of course there are other things the government can do… but they won’t. They could turn us back to a more equal society and reverse this movement back to a Victorian/ Georgian inheritance and family-led society. They could reestablish regulations governing the transfer of international finance, return us to a more locally sustainable society that makes more to supply its own needs. They could rebuild the concept of the public sector and communal ownership of resources that belong to these islands, rather than enabling the very wealthiest of international foreigners to play with millions of pounds as if they were sweets.

But they won’t. We are back in the middle of Old Corruption, where truth is what the richest say it is and all their power is going to keep it that way. Goodbye any pretence of democracy or justice or meritocracy. We need to re-read Dickens, Jane Austen and George Eliot for how this neo Empire, built on the Neo liberalist ideas of economic policies, is going to function. Modern media has already been turned into propaganda.

Calling for wage restraint got them no-where so yes I think they hope a recession will lead to lower pressure on wages.

Not so sure it would work though as it's basics/fundamentals that have gone up and we've had the worst wage squeeze of any G7 country after years of wage stagnation.

Do you really think the majority of people have control over monetary and fiscal policy?

Well yes, the state pension is essentially a pyramid scheme, with additional protection for those at the tip. It is completely unsustainable.

If you're happy to keep the system as it is while/until you benefit from, then you are indeed shitting oththe next generation.