Bond markets - is the shit hitting the fan?

[LawdAMercy]

People who know about these things - AIBU in crapping myself about the future of the UK and the possibility of global financial Armageddon?

Mr 'hold your nerve' ...as if we all have money to gamble with 🙄

And yet, contrary to right wing propaganda, over the years it's the Tories that have been more fiscally irresponsible:

The Tories have always borrowed more than Labour, and always repaid less: they are the party of big deficit spending https://share.google/KAwgqQi23xnKYL85b

He understood economics (and so much better than his predecessor). He knew there wasn't a quick fix and that the UK economy was in a rut and needed long term structural change

@PAYE ,

‘The frustrating thing about this is that there is a consensus behind the scenes among policymakers and even senior politicians about what needs to be done but any politician which has the courage to do it would not be elected.
The UK is spending massively more than it takes in tax receipts. Its tax system and benefits system also creates many disincentives to work, and benefits are too generous with minimal safeguards on receipt.
The government needs to

1. Change the triple lock so that the state pension increases in line with average earnings. Pensioners would still be protected from inflation so this is still a generous treatment.
2. Dramatic changes to eligibility for disability benefits. These should be restricted to more severe cases, only with face-to-face assessments and with payments for under 25s restricted only to services for the child (e.g. therapy/carers for autism rather than cash payments). Mobility payments should be restricted only to cases where there are physical impairments and an adapted car is needed, not for ADHD/ASD.
3. Reform the cliff edges in the tax and benefits system so that work is not encouraged. Child benefit to be universal again, change the removal of the personal allowance to changes in marginal tax rates so no longer a disincentive to work, all working families to be eligible for childcare help. The cost of means testing child benefits and childcare are massively outweighed by the disincentive effect of working.
4. Merge tax and NI so that pensioners have the same tax rates as working age people.
5. Minimum wage to be frozen for the next few years particularly for young people. It is so much better for people's mental health for them to be working and current rates are now at a level which are deterring employment.
6. Review planning reforms to make building much easier. Restrict the appeals process.
7. Reform the wholesale electricity market so that the price is no longer set by the marginal price of gas, change distribution to a regional pricing system and reduce green levies. Sounds technical but would reduce energy costs which feed through to the entire economy and would help to lower the cost of everything.

If these policies were announced, UK debt costs would fall significantly. But I expect that I will be called heartless for suggesting the above.’

I don’t think that there is a consensus at all! Do you have any evidence for the fact that there is?

As I suggested, and Gary Stevenson argues, a wealth tax would help redress a lot of the wealth inequality caused by the 2008 banking crisis, QE and COVID subsidies. Certainly a property tax on super expensive properties makes sense.

The triple lock is asinine and needs to be revoked. However, it would only save £12 bio per annum, which isn’t nothing but won’t solve our problems.

Again, I tend to agree with a lot of your other savings, but they aren’t in any sense magic bullets.

Minimum wage and tax bands being frozen are regressive taxation and clearly wouldn’t be perceived as remotely fair by the majority of people.

The electricity market is complex. I think most price on the marginally most expensive unit, but our problem is that we often use really expensive gas for that, whereas some have a deeper base load capacity.

And, most importantly, the bond crisis is international. Once you look at the Uk vs its closest comparators, we aren’t outliers in terms of spending or debt. It is a problem which is afflicting the whole western world.

Or at least Starmer

Around 20% is Burnham's influence apparently - that's quite significant. Healey has quite the task ahead of him.

Gary Stevenson! Hasn't he quit after being laughed at?

😂

So this illustrates the problem that the government faces. Even a simple proposal that all should pay the same tax rates on the same income meets with outrage.

Given such a situation, the most likely result is a bond market crisis will force changes. However, how much better would it be if we could have a mature and reasoned analysis.

Absolutely laughable. You mock someone else for posting a blog (which is mainly a straightforward presentation of referenced data), implying you'd prefer something more academically heavy-hitting. But your own claims are based on "life experience"!

Right wing politics are the reason the country's in the mess it's in. I'd much rather be living in a Scandinavian-style social democracy. And that's based on my own life experience, combined with a vague feeling I have. See, no need for citing references here! 😀

So what you are suggesting is cutting the income of the poor to satisfy the demands of the rich.

If I am wrong please can someone explain why

If being poor is bad why do we import so many poor people?

Look no government is perfect. But triple lock was done to help poor pensioners. Pip for MH, some people have severe horrible MH issues. Their brain frankly isn't functioning. Green levies were done to fund the green energy boom they happened under the Tories. Protecting us from fossil fuel price spikes.

The people chose Brexit. It's what the nation said they wanted.

What are these demands of the rich?

I'm emigrating to a country where I will pay more tax.

My criticism is of who I am forced to pay to subsidise IE immigrants and under 30s as i mentioned, and the horrible third world services I get for the tax.

I'm emigrating to a country with far higher standards and will pay more tax happily.

Unless you work in finance it's almost impossible to comprehend just how interwoven the financial system is, and how complex financing structures and vehicles can be.

Which is why politicians make such a mess of it all the time. They are effectively trying to reengineer a watch while it's running by hitting the numbers on the front with a hammer and hoping they move.

Even the ones who get it are at the mercy of an electorate who don't know, don't know they don't know, and don't care that they don't know what they don't know.

In terms of evidence of a consensus - please see this report on tax reform prepared by both right-wing and left-wing thinktanks https://cps.org.uk/research/tax-reforms-for-growth/

Reforming the triple-lock would go quite some way as (i) the effects of the triple-lock increase over time (ii) removing the uncertainty created by a open-ended commitment to grow pensions faster than government income - and ultimately to be bigger than the whole economy - will itself reduce debt payments, giving the government more money to spend on the things that matter.

The freezing of the tax bands would be less of an issue if the cliff-edges were removed. It would be better to have lower marginal rates of tax that start from lower levels.

Thank you. I'm not in a position to disagree with what you say about him, but I still don't think it excuses his patronizing remark, a very wealthy man telling the rest of us to not panic when suddenly we can't pay our mortgages

Because we need people who can be easily subordinated so that they will work in the low paid and unpleasant jobs that no one else wants to do.

As much money as they can get their hands on, and then some. The wealthier you get the more it becomes about status about being the richest, although that seems to be much more common in men than it is in women.

an electorate who don't know, don't know they don't know, and don't care that they don't know what they don't know.
@OooPourUsACupLove, to be fair it is all rather hard to get your head round 🤪.
I wish I worked in finance so that I could understand it properly, but I don't really have the level of numeracy required.

There are two threads running today that speaks of our issues.

1. The cleaner wants me to pay in cash to avoid paying tax. AIBU to refuse? Many saying yes it’s the cleaner’s business whether they pay tax
2. I want to be a SAHM. Should I go onto benefits? Many agreeing that the OP should work as little as possible..

Our welfare needs reforming, we need to get more young into work, the old must accept losing the triple lock.

We must lower tolerance of the black market or make catching them a priority to solve illegal immigration. We must stop this idea that “the rich” aren’t paying enough.

Labour would have to fall on its sword to do the above so that’s not going to happen. The bond market will continue to punish us until there is change.

These were of course well-intentioned policies. But they have had unintended side-effects.

The purpose of the triple lock was to alleviate pensioner poverty. This has now been achieved, with pensioners being much less likely to be in poverty than any other section of the population, having higher disposable income than working people and - separately - having the highest wealth.

The problem with the triple lock is that it works in random and unpredictable ways. If inflation is stable at around 2%, then it works fine. But when there is high inflation, it breaks down.

After the Ukraine invasion, inflation rose rapidly in 2022. Wages did not intially increase in 2022, but then increased in 2023 and 2024 to compensate workers for the inflation increase. The effect of the triple-lock is that the state pension got boosted twice - once for inflation and then again for wage growth. So pensions increased much faster than either inflation or wages. This issue compounds over time and is unpredictable.

For PIP - yes again well-intentioned but it has terrible incentive effects. It is based on self-reported symptoms and has no means testing. Far from supporting people to work, over 80% of PIP claimants are not working and many stop working when PIP is approved. This is particularly disastrous for young people if they receive PIP early as they are then less likely to ever work.

I work in tax and these are exactly the changes virtually every think tank across the political spectrum have been advising ever since Labour got to power. They were hopeful Labour would act. I was hopeful Labour would act (I voted for them). I’m so disappointed that they’ve been so spineless! The country will be shafted because politicians don’t want do unpopular but necessary things. There’s no way out of our situation until they act. They know what needs doing. They’re too weak to do it. Pathetic!

I mean your comparison with other countries is wrong because you’re comparing apples and pears, but how do you think the outgoings of a pensioner couple compare with the outgoings of a family of four? That’s why pensions are what they are.