Economy Home Truths

[Magschoice]

Just read this article:

Former Chancellor Lord Hammond has said the government & the prime minister must risk unpopularity and tell "some difficult home truths" about the state of the economy.

“That (cost wise) it has been the equivalent of fighting a war. The effects of which are going to be with us for a very long time”

“There will continue to be a rise in unemployment post pandemic, which is already at the highest level it has been since 2015.”

The government are 2 trillion in debt. I fear massive job losses and spending cuts. I do think the housing market will hold up though, to a certain extent

What are everyone’s thoughts?

@Pomegranatespompom pls tell me where I specifically focused on the NHS, all my points re the public sector have referred to the whole sector not just the NHS. 🙄

Saying that the public sector in general has better pensions then the private sector doesn't mean everyone has a 1m pension pot or earns a lot.

Not sure why you are being so so defensive @wondarah by comments were more to clarify the generous pay/pension isn’t the norm.

I'm the defensive one?

I've actually heard 'I expect NHS to fix this' , regardless of the issue, how possible a fix was or any personal responsibility whatsoever. I was speechless! Agree about the missed appointments - there should be a fee if you don't turn up similarily to what my dentist does.

They should but of course they won’t.
In combination with Brexit, the next 5/10 years are going to be pretty desperate for people who are already struggling.
For optics, expect everything will go to the NHS and the green agenda whilst other public services are quietly degraded.

My GP does a 3 missed appointments & you're out thing.

I remember being in hospital & they asked if I had paracetamol at home because they paid xxxx for it. I couldn't believe it.

As in I couldn't believe the cost to the NHS

@Malteser71

My MIL (76) is happy to report that she has £230,000 in the bank. She doesn’t need it - has a healthy pension, owns her own home. ‘Likes to know it’s there.’

Why is this ok when the economy is fucked?

To be fair she's worked hard for that money over the years and may well go out and spend it when she can.

@wondarah my frustration is not directed at you.

A simple add 2% to higher band of income tax would help and stop throwing money away.
Stealing pension pots is very shortsighted. Those pensions will offset many care costs in a few years time. Yes it sounds a lot, and indeed is to many, but its not a million pounds in your hand. For many, the lump sum pays off mortgages.
There are plenty of other ways - untaxed directors loans being a key hidden tax avoidance route that needs closing.
Imagine a director is paid £2million. At the current rate of 50%, nearly half of his or her earnings should go in tax (as happens for high salary public sector workers). But if the company pays the director just £50,000 and puts the other £1,950,000 into an EFRBS, and then the next day the director 'borrows' £1.9m from the pension scheme to spend as they like, the tax bill will be almost nothing.

There will be no tax to be paid on the loan – after all, it's not income, it's a loan and will supposedly have to be repaid one day. The only tax is on the £50,000 paid out as salary. '

There's an awful lot of money that is paid out without being subject to tax and its not in the public sector workers pockets.

@ItsAllBlahBlahBlah

Without sounding really dim, what does it mean if the house market crashes.. In real terms, to ordinary people. I have brought my house with a reasonably chunky mortgage, me and DH work in the utilities sector so are reasonably safe (please god I hope) but have two very young children. I just don't understand what this would mean for us, can someone explain it to me?

It is worst for those that have recently bought, and need to move for whatever reason, as you are stuck owing more money than the value of the property (negative equity). So you may have to downsize and take a big loss on your previous house and suck up the costs of moving too.

But they won’t crash, severely, perhaps fall back a little, but Tories love endless house price increases and they will do everything to maintain that.

@Pomegranatespompom

People started careers knowing pay was lower in the public sector but that pension was a benefit. It’s pretty unfair that’s changed so much and 1 million pension pots are only really for the consultants in the latter years of their careers. But these are consultants who are highly skilled ie neurology/ haematology. Is there the same appetite to pursue the large private sector pensions? I’m guessing we’ll all need to pay more apart from the super rich/ tax savvy who will hide their money. In the news - no nhs pay increase this year. They’ll be strike action. Especially as in Scotland they are receiving a £500 bonus this month.

No, bog standard GPs and dentists could accrue a £1m plus pension "fund" in the NHS too. It's not just the "top" people. I'm an accountant for a number of "normal" doctors and dentists! Yes, rules have changed so it's harder for the younger ones now.

Not sure what you mean re public versus private. A private sector employee with a £1m pension pot suffers the same lifetime allowance and penal tax charge. There aren't different tax rules for different sectors.

@CherryRoulade

A simple add 2% to higher band of income tax would help and stop throwing money away. Stealing pension pots is very shortsighted. Those pensions will offset many care costs in a few years time. Yes it sounds a lot, and indeed is to many, but its not a million pounds in your hand. For many, the lump sum pays off mortgages. There are plenty of other ways - untaxed directors loans being a key hidden tax avoidance route that needs closing. Imagine a director is paid £2million. At the current rate of 50%, nearly half of his or her earnings should go in tax (as happens for high salary public sector workers). But if the company pays the director just £50,000 and puts the other £1,950,000 into an EFRBS, and then the next day the director 'borrows' £1.9m from the pension scheme to spend as they like, the tax bill will be almost nothing.

There will be no tax to be paid on the loan – after all, it's not income, it's a loan and will supposedly have to be repaid one day. The only tax is on the £50,000 paid out as salary. '

There's an awful lot of money that is paid out without being subject to tax and its not in the public sector workers pockets.

But the company paying the £1.9m into the EFRBS doesn't get corporation tax relief as it's not a legitimate business expense for tax. So it pays corporation tax on that £1.9m. If it paid the director a salary, it'd get corporation tax relief on the salary paid.

So not quite as clear cut as you make it sound! The company pays more CT than it would have done - in fact that's £370,500 at 19%!

I wonder how the lockdown fanatics will feel when they lose their jobs / homes? But of course it was all worth it to “not kill granny.”

Tax free lump sums should be a target for some form of tax or reduction of limits/allowances etc. Whether a tax free lump sum on redundancy or on drawing down a pension. There could be reductions in the limits/amounts that are tax free, or a modest rate of tax applied.

There was an interview with the chief economist of the IMF on the daily show (where I get a lot of my news, TBH) at the beginning of the pandemic, and she was saying that the problem is that this is so unprecedented, having the world’s economy effectively put on ice for months / a year. Best case scenario, when countries come out of lockdown and everything will just pick up again and there will be a quick recovery. This is what China has looked like post lockdown. Worst case, things will take longer to pick up and governments around the world would have gotten themselves hugely in debt. At the time she said they had unprecedented requests for aid from all sorts of governments, at a level never seen before.

The billionaires are hoarding all the money they should pay
Yes you Smaug! I'm looking at you, salivating over your hoard of treasure, it was never rightfully yours give it up!

After all what uses is a hoard of gold when the societies on which you predated have collapsed, the social structures which allowed you to accumulate your vast wealth are crumbling, there are no roads for you to drive your Ferrari on

The government are 2 trillion in debt. I fear massive job losses and spending cuts. I do think the housing market will hold up though, to a certain extent

Why do you believe that?

Surely a crash in the price of houses is inevitable logically speaking.

The UK has entered 3rd Country status by dint of Brent.

Brexit

A housepricecrash would be a great way to deflate the money supply would it not, either that or a stock market crash 🤔

In under 15 years my very modest 3 bed home has gone up 160k. I'd be happy for it to drop back to what we paid for it as long as everyone else's home did the same. A leveling out of people's unearned wealth. As for pensions, people pay in all their life for this. I wouldn't expect the government to go after this but if they did then I'd have to ' suck it up ' as they say.
I haven't got the answers really.
Making the big companies like Amazon pay their taxes might help too , but how that all works is a mystery to me.

As for pensions, people pay in all their life for this

Not for state pension they don't; granted they pay in the expectation they'll get one, but the money's actually used to pay for the current pensioners rather than "saved up" for those paying

Which could be a problem if, in a depression, younger working folk become less willing to pay - and that's if they've even got a job

I was talking about private pensions that people pay in for
Not the state pension.