AIBU Income Tax rise.

[H202too]

To be panicking about income tax rise.

Things are tight and to loae even £30-60 a month will be difficult.

I know people are talking about the mansion tax being a no go. But I would prefer this than taxing the workers as per usual.
The tax free rate should be put up. What a mess.

Teachers? Yes, they work hard. Do they get paid excessive mega-bucks? No.

They don't get a bad wage particularly in london & the pension is very generous.

That'll all happen sooner or later anyway. Might as well do it on purpose whilst there's still an NHS to charge for.

There are policy choices that could be made that would result in UK growth and rising productivity and therefore rising living standards within a couple of electoral cycles

@222days what are these?

I know the paper you are referring to. It proposed much more than that!

There are other ways, as I’ve said. But the electorate don’t want to hear it. They want an all-you-can-eat afternoon tea. So things will continue down the self-inflicted doom loop.

There is a serious point in there somewhere. I wonder how many would miraculously decide they didn't need a mobility car if the only choice was one of those three wheelers, rather than a car costing upwards of £40k? Might sort the wheat from the chaff, so to speak. The mobility scheme is a joke. My Dsis broke her neck to get her DD one when she realised all it took was 'public transport anxiety' from being neurodiverse. That 'anxiety' didn't stop the DD from fucking off to Europe for 2 weeks this year on a plane or going on a whole heap of city breaks by train.

Realistically, the teacher on 45k will have to cut their cloth accordingly. If they can't afford their mortgage they will need to move to a cheaper property or find a way to supplement their income. Someone on that salary can afford to pay more tax. The simple fact is they don't think they should have to and don't want to because it would impact their lifestyle choices.

OK bye

You do know that to criticise Starmer does not equal love Farage.

And? That vanishingly small percentage pay most of the tax. That vanishingly small percentage - people are happy to target. It won’t raise much because they already pay so much. Most likely will be a negative impact. The big money will come from basic rate tax. Higher rate taxes are already perverse and so high they REDUCE tax take. The government know this. We are actively taking less in tax. Who is working to be financially worse off?

Your last paragraph is actively what is happening amongst the cohort bankrolling the county. You and I cannot afford for them to be REDUCING their tax take anymore. They are and it has been proven and show by many economists on government funded enquiries. The highest rate was cut to 45% and tax take INCREASED. This is better for everyone. Thinking you’re punishing people because they deserve it is so short sighted. Everyone misses out. I refer you to this month’s productivity downgrade.

I am happy for the tax rate to go up..but it must be coupled with public sector reform...it is incredibly wasteful.

Quite a lot needs to change for our economy to be made sustainable and productivity to increase, which is the only way to raise living standards sustainably rather than it just be a case of dividing up the remaining crumbs between warring factions. Fundamentally, it requires a huge improvement in the efficiency of spending, a coherent industrial and trade policy, investment in infrastructure and education and a very large redirecting of public spending from the old to the young. Over 65s are 15% of the population yet consume over 50% of public spending. This is why taxes are going through the roof, and there has been chronic underinvestment in the parts of our economy that will actually generate improved productivity, rising living standards and growth and some hope for the future. The longer this is not done, the worse the effect will be.

A good start would be to:

1. means test the state pension with a gradual taper rate like in Australia, so that it reaches zero when the PLSA income level for a moderate retirement for an individual/ couple is met (or assets sufficient to generate this income). This would create absolutely zero poverty because it is set at a level which allows for foreign holidays, running a car, eating out regularly, etc: the only impact would be that those pensioners who don’t need the state pension and are currently spending it on extra luxuries no longer receive it/ all of it. This would save £80-90bn per year - these completely unnecessary welfare payments to wealthy pensioners are by far the most wasteful part of public spending and it needs to stop. The quid pro quo can be no further raises in state retirement age. There is no rational argument for the status quo. The current generation of retirees are - on average - extracting £200k per person more in welfare and state services than they paid in tax over their lifetimes, in real terms. This is not sustainable and cannot continue. They didn’t pay sufficient tax to fund their demands on the current working aged population and neither did they provide anything like what they are demanding for their own parents and grandparents. It’s crippling our economy. Ceasing these payments to people who do not need them at all would create no poverty whatsoever, just upset a lot of pensioners who continue to claim that they have “paid for their pension” and that it “isn’t welfare” when all they have done is pay the tax required so that they aren’t breaking the law and go to prison and it’s been clear ever since the National Insurance Act 1948 that this is a welfare payments and - just like all welfare payments - the eligibility criteria and amount is subject to change (the PLSA levels are uprated with inflation every year and currently £31,700 for an individual or £43,900 for a couple after tax and housing costs - so far exceed the income of the vast majority of working-aged people who are paying NI, housing costs, childcare and have nowhere near this amount left as disposable income, so no pensioner would be left in poverty by removing their state pension at this level. When you consider that the recently-proposed cuts to disability benefit aimed to save £5bn per year and this measure would save £80-90bn per year, you can understand the scale of the problem and that it is pension welfare that is one of the reasons why the UK’s infrastructure and education system and all productive investment is falling apart. This ponzi scheme cannot continue and simply won’t, because it can’t, but the longer it goes on the more damage it will do and the harder it will be for the UK to recover, all so that working-aged people can fund luxuries and extra holidays for wealthy pensioners who are perfectly capable of supporting themselves, because politicians are scared to upset them. They need to get over this and do it - it should have been done decades ago). These pensioners funded nothing like this for their own parents or grandparents, and as a cohort paid nowhere near enough to fund it for themselves. They had decades where the collapse of this ponzi scheme was foreseen as an inevitability yet continued to vote for politicians who did nothing about it and demanded no change, and now state that it would be “unfair” to change it for those already retired. Ridiculous. It has to be changed and somebody needs to get a grip and tell them it is being changed, with immediate effect.

2. The above measure would enable significant investment in productive parts of the economy that have been starved of cash in which investment is essential to generate growth: education and infrastructure in particular. We need a lower proportion of people going to university and far more technical colleges with apprenticeships set up in conjunction with businesses leading to respected and useful vocational qualifications that lead directly into employment with the training employer, more similar to the German model. We also need to increase funding for schools by 50% to ensure smaller class sizes and a wider range of schools to suit different needs - some more academic in focus like the old grammar schools and some more focused on arts or sports or practical and technical skills. Trying to pretend all children are identical is ridiculous and we need to abandon the failed model of forcing almost all children into one-size-fits-all mainstream education which serves nobody well. Fund SEND education properly and put a proper regulator in place for education which will impose fines and sanctions and strip qualifications from people or even impose prison sentences when the law is broken, as is the case in every other sector (law, medicine, finance) rather than individual parents being expected to enforce the law. In the long run, the failure of education and enabling every child to reach their potential is going to cost us orders of magnitude more in terms of welfare, lower growth, higher justice and healthcare costs, etc, so underfunding education is economic insanity.

3. All responsibility for the provision of education and social care should also be taken back within the remit of the relevant central Government departments so that there is accountability, even if they delegate implementation tasks to Local Authorities. The recently mooted plans to redistribute Council tax across the country just add another layer of bureaucracy to achieve the same effective central funding outcome but with no accountability allowing central Government to blame Councils for the failures when they are underfunded and not capable anyway of administering these systems competently and this has led to a huge squandering of resources on ineffective systems designed more to try to circumvent their statutory responsibilities than actually implement the required services. Social care whether in the home or out of the home should be treated equally in terms of funding. General taxation can rise slightly to fund this and Council tax be significantly lowered with Local Authorities responsible only for local services such as waste collection, leisure centres, road maintenance, libraries etc.

4. The savings from point 1) also would enable us to remove the op-out for auto-enrolment and significantly increase the level of mandatory contributions for both employees and employers whilst making tax cuts to make this fiscally neutral and ensure that there is a stable pensions system in place for the future. A similar mandatory scheme should be introduced for the self-employed unless they can demonstrate sufficient levels of independent assets to fund their own retirement entirely independently. Meanwhile the Government should commit - as independent report after independent report into the pensions industry in the UK has advised them for years now - NOT to make any further changes to the rules around withdrawals, tax relief, etc because this is undermining any faith in people trusting the system sufficiently to invest their money into it, knowing rules might be changed in the future.

5. Abandon the failed NHS model and emulate on of the far superior European models like those in France or Germany which have been shown to deliver far better patient outcomes and value for money. People would get treated in a timely manner, healthcare would vastly improve. There is a reason why no other country in the world has emulated the NHS system and all of the countries that have better health outcomes do not use a system like ours. Every time this is proposed ridiculous people try to pretend that changing it would mean we were moving to a US model which - again - nobody else in the world has copied for very good reasons. There are very good models between these two extremes that actually work and won’t bankrupt the country.

6. Rejoin the single market and customs union as quickly as possible and implement a coherent industrial strategy and trade policy, focusing on Government support for start-ups in key high-productivity sectors where the UK has an existing competitive advantage and knowledge base (tech, pharmaceuticals, engineering, the arts, finance and professional services, defence, life sciences etc) linking these up with grants, research from our best universities, knowledge clusters and business support networks including a new Government export assistance service for small businesses to help them overcome the costs of legal hurdles and compliance documentation with templates/ paperwork assistance etc.

7. A huge investment in our failing infrastructure (water, internet, road, rail, housing - but with acceptable standards for homebuilding unlike now) and plans for food security, water security, energy security, climate change protection (e.g. flood defences). Markets will be favourable to a coherent long-term investment plan in such areas because of their impact on long-term productivity and growth rate therefore this would not negatively impact the UK credit rating. This would also generate more highly skilled jobs and demand for the apprenticeships per point 2).

8. Stop selling indexed links gilts! Most comparable European countries have a tiny amount of their debt issued on an index-linked basis and are therefore paying much lower interest than us on similar debt levels. This was gross economic mismanagement.

9. Fix the ridiculous UK tax system which is harming productivity. These points are not in priority order and frankly this one should be done immediately because the effect would be almost instantaneous unlike some other items on the list and it is entirely within Government control to fix. Anomalies and perverse incentives little the system at every level. All taxes and welfare should be levied on a household unit basis, as in pretty much every other developed country. Couples could choose to opt out and be separate “household units” splitting their household tax allowances/ thresholds between them equally if they wish to maintain separate finances. Obviously those in HMOs or adult children living with parents would be separate “household units”. This is how the system operates in all sensible countries of which I am aware. Then two households with the same household income will be taxed the same amount regardless of whether they’re a single parent or couple or how the earnings are split between the adults. This is a matter of basic fairness. Income tax does need to rise but this needs to be through the basic rate (due to sheer mathematics). This should be done transparently by simply changing the rate. Fiscal drag is economically damaging and a commitment should be made to uprate all tax thresholds annually with inflation.

10. As well as the above, the cliff-edges in the tax system need to be removed. Child benefit, childcare funding and the personal allowance should be made universal again, and the universal credit taper rate reduced significantly because there is robust independent economic evidence demonstrating that this would generate more economic growth, reduce long-term welfare dependency and raise tax revenues and economic participation rates significantly. This would also reduce the number of people cutting their hours/ retiring early/ emigrating and therefore reduce skills shortages and the need for immigration. Rationalise the tax system so that pensioners pay NI given they are by far the highest users of welfare and healthcare which it was supposedly meant to fund (obviously we all know it isn’t hypothecated and does no such thing anyway, but there’s no reason they should be exempt). Adjust tax rates to reduce the discrepancy between the level of tax on earned income and investment income (some is justified to generate investment and risk taking, but the current level is too extreme with employees being taxed far too heavily proportionately). There’s absolutely no excuse for this Government or the last one not to have taken the measures in points 10) and 9) to fix the tax system given the very clear evidence of the economic harm that the current system is causing, suppressing growth and productivity. And certainly no excuse to be telling us they need to make “tough decisions” and make cuts/ raise taxes without taking these measures first. Restore the social contract: the quickest way to undermine public services entirely is to exclude those who are actually paying for them from using them. They will be paying their share AND for many others to access the same and in most European countries that is accepted and it works. If you start excluding higher earners from childcare funding etc you create perverse incentives in the tax system, discourage work from our most productive people, and condemn those public services to perpetual decline and cuts and well as creating further social division.

11. Link up Government IT systems properly so that healthcare records, HMRC records, DWP records, CMS records are all linked together. Ask the Estonians if we can buy their integrated IT system from them given our Governments are so terrible at IT projects. This will enable much easier identification of fraud and tax evasion. Digital ID cards should be required and added to traders’ invoices so that their transactions are logged and they cannot do “cash work” and under-declare and make it an offence to pay for work over a de minimis value without this digital ID number to stamp out black market. These ID cards can also be used to reduce black market working generally. There is a huge amount of tax evasion going on. Implement a system like those in other countries where absent parents who don’t pay something resembling 50% of the cost of housing and raising their children (not the laughable current CMS rates) have their driving licences and passports confiscated and if they still don’t pay then they will be sent to prison i.e. treating these debts with the same severity as money owed to HMRC.

12. All benefits other than disability benefits should be contributory like in most European countries, so that they resemble the insurance-based system that they were intended to be. This would enable them to be set at a level where they are a percentage of previous salary, again in line with most European countries, so that they do actually provide a genuine safety net for all sufficient to cover their baked-in existing living costs which is important for the social contract (and those with higher costs will have been paying proportionately more tax to fund this while working). This will also prevent people claiming unemployment benefits as a “career” without ever working at all (unless severely disabled). Benefits like the child element of UC should be replaced by an additional tax allowance based on the number of children (again, a model that’s worked well in other countries for decades) because this encourages work rather than disincentivising it, while still recognising the additional costs involved in raising children.

13. Implement something akin to the EU Directive on Tax Transparency which Brexit was largely designed to avoid being implemented in the UK, requiring publication of the beneficial ownership of all accounts held in UK offshore tax haven territories. Reform rules around transfer pricing which enable large companies to move profits abroad and transfer costs into countries where revenue is generated to eliminate their profits. Reform the rules around dividend distribution linking them to the requirement to provide disclosures on long-term viability so that a company cannot make distributions unless it can demonstrate sufficient cash is being kept in the business to meet long-term investment requirements (e.g. water companies needing to invest in infrastructure as population changes/ upgrades are required).

These would be obvious first steps for a Government genuinely wanting to generate growth and rising living standards. None of it is rocket science.

Socialism has always been the politics of envy. Socialists hate aspiration, ambition and achieving a better life. Yet, the minute they get into power they want all the freebies they can get. It was ever thus. Trying reading Animal Farm.
And these liberal, leftie and occasionally very entitled Labour supporters who know scarcely anything about what life is like for the man in the street are the worst of all of them.

Yes, that’s the joke we now have to ironically enjoy now. 🙄

Of course you were targeting me (or people like me).

You accused me of barley paying anything in, and having the audacity to expect others (who can pay in) to contribute more (despite the fact that my care saves the government several thousand a week on care home fees)..what exactly do you suggest people in my situation do? Would you be happy if all unpaid carers dump their loved ones at the steps of social care so the state has to fund care which will far more?

On top you accused me on using schools for the DC (guilty), using the NHS (guilty too) and then you proceeded to tell me I further get from the pot by accessing social care (I don't, otherwise I could work and earn more - and pay more taxes), you told me get further from the pot in form of UC, housing benefit and assumed I have a council house. None of this is the case.

I'm not saying it easy by any stretch of course I would fine it tough. I suppose maybe it is just a difference in left/right leaning views, to left you are doing you are doing it for the state because the state is responsible for caring people, to the right you are doing for your family because it is personal responsibility to look after your family.

Are DC pensions excluded from this daft idea?

DF's 'gold plated' pension is a few hundred quid a month. I'd rather he had that money to spend.

I mean we’re a bit far from that. State dependency is at an all time high and taxes are highest for 70 odd years too.

@mummymeister you seem to have missed the main point that those who have never had a paid job have been excluded from employment ‘largely due to the decline in casual work and school-leaving jobs’.

Those who have never worked did not choose the work conditions they find themselves in. Employers did. The state had already invested in sufficient education to supply workers but employers were required to pay decent wages and provide training on the job.

Unfortunately it was more profitable for employers to employ the already skilled that would work for lower wages. Economic migration resulted from a desire to increase profit. It was not necessary due to a lack of work ethic in school leavers.

This might seem like a win/win as the state has not funded the education or skills training of the new labour force. However, over time the state picks up the bill for those it has funded in early years that have been thrown on the scrapheap and now find themselves unemployable.

There is a link between the wealth gap growing and the state budgets becoming unsustainable. Profits and shareholder dividend have vastly increased (disaster economics of the pandemic and war) whilst wages have largely stagnated for the past 2 decades. In the UK wage stagnation has occurred in tandem with huge increases in housing costs with those who can’t afford to buy paying rent that is equivalent to or exceeds the cost of a mortgage.

State benefits (excluding universal pension) used to only be paid to those unable to work due to ill health, disability, caring responsibilities or to those temporarily without work to tide them over. Now it is paid to those whose employers don’t pay adequate wages to pay for essentials including housing costs. Workers are not better off, the state is crumbling under this new ‘requirement’ to subsidise living costs and can no longer afford to fund public services or fund a safety net for the vulnerable and poor. The only beneficiaries are employers and their shareholders that pay low wages and landlords that charge high rents.

There are huge macro economic challenges that face any government that can’t be fixed by tinkering with existing systems. In the UK we have a declining birth rate and less workers to support those retired.

And we have different rules for different folks. It’s seen as absolutely correct that anyone with savings over 16k can’t claim UC regardless of contribution even if they lived frugally and saved for years but a person who has made less contribution with savings over 16k can claim state pension. My NI record is made up largely of CM and then carers allowance. I will need state pension to afford to live. But even with the same NI record I could have hundreds of thousands in savings, live rent free etc and still receive state pension that I didn’t need. It is illogical.

But at least now the recognition that the level of government borrowing to bolster the system is so high we can move away from the idea that all will be fine if we remove all benefits from the vulnerable and poor (including pensioners) and deport all migrants.

@222daysthanks for those quotes, sterling work getting them together. I did copy and keep for threads on their tax hikes.

DH has just said exactly the same. He's already floated 3 days at work and been knocked back so retirement next year could well be on the cards.

Actually it isn’t. Workforce participation is at an all-time high since it started to be recorded properly during the 1970s, largely due to a far higher percentage of women working (or working more hours). There is a decline in the number of men doing so. But it simply isn’t the case that a larger number of working-aged people are now economically inactive now than previously: quite the opposite.

Only 0.3% of our 3,000 + billionaires left last year ( and we don't know how many came back /in. ) The problem is the richest not paying their fair share. There are too many ways to off shore money, avoid inheritance tax, use limited companies to avoid tax / go bankrupt but set up again the next day etc etc.

The Duke of Westminster, worth £9,300,000,000 ( after the death of his father) managed not to pay any inheritance tax at all whereas 'ordinary people' have to pay it at 40% on estate worth over £350,000. The richest 5 families in the UK own more than the 50% poorest of the population.

If we nationalised Water, Electricity. Gas, Rail etc and built council houses there would be no need to raise taxes on the poorest eg ( by freezing the tax free levels ) because we wouldn't have to pay out huge dividends to shareholders ,( as they wouldn't exist anymore) it would halve the cost of rents so poorer people would be able to spend more and boost the economy.

The Conservatives, Reform etc of course do not want that because
they want to keep people poor, desperate and above all under their control, witness Reform being a limited company under Farage's control not a democratic party where members have control.

I always keep records of what politicians have said. As you know, I am equally critical of all of them based on how egregiously they are behaving. I have no political bias. I simply want evidence-based policy and competent leadership so that there is some prospect of things improving for people in the UK over the coming decades. I take a long-term view and am only interested in politics insofar as it impacts economics (very negatively, generally, in the UK, no matter who is in charge because we have this system which encourages short-termist decision-making and an electorate who would rather squabble over irrelevancies than demand that their politicians take the actions required to improve things).

It’s all very depressing to be honest and every time I see a thread like this it is littered with people repeating economically illiterate or irrelevant “talking points” fed to them by whichever side of the media they follow, and no engagement whatsoever with any discussion on solutions that would actually improve things in the long term.

There is no short-term cake. Anybody claiming there will be is lying. I live in hope that eventually a sufficient proportion of electorate will grasp this fact but I am probably dreaming.

Benefits should have been cut. But no its tax tax tax.

Honestly, yes please.