Has Labour crashed the economy ?

[Dbank]

With recent news on GDP and job vacancies, do you think Labour's actions are about to trigger a recession?

Of course. They always do.

I think recession was a done deal before the election....it's inevitable. Labour didn't cause it it's been on the cards for 3 years...

Looking at today's figures compared to the first half of the year I think the answer to your question OP is unfortunately yes.

Keir must be getting really nervous now. He's staked Labour's entire reputation on the decisions of Rachel from customer services who seems not to be doing that great a job...

Figures were looking pretty promising before the election actually.

If that is the case, then the NI increase on businesses will hasten the slide. The early 90’s recession showed that once businesses close, there are mass redundancies, it takes years - 5-10 to see any recovery and for business confidence to improve.

The stats show I think that it is now going to be comparatively more expensive to employ part time workers than full time. AS small business owners decide it’s not worth it any more or go bust, larger businesses decide to only offer full time posts, who will be the first to be affected? What type of people/workers like/need part time roles?

As a working class person i think theyre doing brilliantly.

I can see why you might hate them if you're middle to upper class and you don't want to pay tax.

@marmaladeandpeanutbutter

"It's outrageous that people are talking about The Labour Party
"Crashing the economy " (what ridiculous nonsense), when the only person who actually did this was a recent Tory prime minister. It took her all of 6 weeks."

I agree that it is certainly both exaggerated and too early to state that Labour are "crashing the economy ". However it is accurate to state that the economy is currently slowly shrinking under Labour.

How much of this is due to global slowdown and how much directly because of Labour policies is impossible to accurately differentiate. But it is accurate to state that the rise in employer NI will mean that employment levels will be lower than if this rise didn't take place. Also the increased Government borrowing will mean that interest rates will be higher (or fall more slowly) than if this additional borrowing didn't happen.

@TheGrinchIsComingToTown

"Who would you like to tax more?"

I am conscious that I never answered your question and it does frustrate me that posters on all topics often criticise a particular view, choice or policy without then bothering or having the ability to propose an alternative option. So apologies for the delay in responding but I would answer as follows:

1. introduces capital gains tax on all house sales (less costs to renovate / improve) including primary residence
2. Scrap the inheritance tax threshold in its entirety. Both these measures seek to tax windfall unearned gains.
3. Increase both the state and public sector pension retirement ages by 3 months every year up to the age of 68 from now in order to produce immediate savings rather than having a cliff edge policy where it jumps radically from one year to the next.
4. introduce say a £5 or 10 fee to access your local GP or A&E in order to reduce missed appointments or unnecessary visits.
5. Tariffs on manufactured goods imports particularly from China where cheap polluting energy and poor working conditions/ rights gives an unfair competition.
6. significantly increase the tax on alcohol sold in supermarkets but not pubs - currently alcohol costs the NHS £26 billion pa but alcohol taxes only raise £13 billion.
7. a more balanced shift from taxation principally on income to taxation more equally on both income and wealth.

That said I recognise that there is absolutely no politician or party that would ever get elected on such an unpopular list of policies as these.

Unfortunately reality is stuff needs to be paid for, we've had 20 years of cuts and austerity and now we have to pay up or face another 5 years of tax cuts for the rich and falling public services

UK taxation is currently at a 70 year high so there is limited scope for further increases and I agree with you that public services are already suffering. Plus Government debt is also at a record high since 1962 and the interest payments alone are equivalent to the entire education budget.

Rachel Reeves solution was to increase taxation and debt in the hope of increased economic growth- unfortunately the reverse has happened with shrinking growth:

www.ft.com/content/f46d32e0-0865-4d90-be74-0cb0a4a35478

So I think the unfortunate reality is that to get out of this mess and grow the economy any tax rises need to be limited and fall more on individuals and not businesses. Public spending will need to at best be static or at worst cut further. National debt cannot be increased any more as Liz Truss dramatically found out the hard way and Rachel Reeves is finding out the slow way.

So higher taxes and lower Government spending on services- which is not exactly a vote winning combination.

Well the Tories want a flat rate tax, basically a increase for ordinary earners and a reduction in the top rate. That's hardly a solution either.

I'm not what's else we can cut to be honest, roads, NHS and education are bare bones as it is. I think it's time to consider scrapping the military altogether apart from a very small defence force ...no nukes, subs or aircraft carriers and slimmed down air force..but even all that won't save us that much

@dubsie

Whether a flat rate tax benefits the poor or the wealthy most depends on how it is structured and most importantly what the tax free threshold is. For example it could be designed with a tax free threshold of £30k and then 40% on everything over that. This would benefit the less well off the most.

But I think you are probably right that the Conservatives would be more likely to design it so that it benefits the wealthy more. Anyway even Badenoch admits that with the current state of government finances there is no way it could be implemented.

Very little is spent on defence - c£50 billion. Any meaningful savings would need to come from the two biggest expenses - the NHS and State pensions.

The global pandemic was the biggest transfer of wealth from the public to the private sector. The fantastic increases of business profit did not increase the amount of tax paid but profit paid to shareholders. There is no trickle down.

www.marketplace.org/2023/01/16/how-the-worlds-richest-people-became-much-richer-during-the-pandemic/. The link on what companies choose to do with profits is insightful.

The above is US based but capitalism is a global system.

Labour chose to increase employer NI but companies chose to pass this cost onto workers not so they could pay more tax but to protect inflated profits they had become used to. It was not inevitable but a conscious choice.

Workers rights have become seriously eroded with zero hour contracts etc. Take the social care sector where agency staff are paid minimum wage and home care staff are not remunerated for travel between 'clients' but profits and dividends can be more than generous.

The massive increase in HB and in work benefits does nothing but increase the income of private landlords and businesses that pay their employees low wages who as a result of high rent and cost of living increases (supermarkets and energy companies who make huge profits for shareholders) can't afford to live on earned income.

It is naive to think that pandering to business interest will increase public spending. It won't.

@1dayatatime ah the good old 'global redistribution of the social relations of capital'. I'm afraid this is built in to the model due to businesses wanting to maintain or increase profits for selfish reasons.

Businesses don't want to employ local labour if it is more expensive unless they have to. Not because they are really philanthropists and want to pay living wages or fund the public sector.

This policy has led to people not receiving a living wage (where government tops up employers) and a fucked public sector.

We need to organise things differently.

The level of in-work benefits, transferring huge amounts of tax payers money to the private sector, is something that Labour should never have introduced. But they did it to try and hide the level of employment - the same reason they massively expanded university places without investing anything in sectors that would create jobs to absorb the influx of graduates to the employment market.

Which is why those of us who have seen it all before chuckled at the naivety of all those lauding “the grown-ups being in charge”. As this set of grown ups are just as inept, but in different way, as the last.

6 months in and the pledges are falling by the wayside. Remember that we were going to become the fastest growing economy in the G7? That’s now been dropped, and replaced by an aspiration that our standards of living increase over the term of the parliament. But, it’s hard to find a time in the last 50 years when that hasn’t been the case 🤣. It’s just a shame we don’t have an opposition capable of calling it out. So I have to say, I’m glad I’m not dependent on the UK anymore. I mean, I don’t think France or Italy, where I spend most of my time now, have any brighter outlook. In fact, maybe worse. But they are part of the EU, the tax regime (for me at least) is more agreeable and the weather and food are better ☺️

How on earth do you cut the NHS when we have record waiting lists and cutting state pensions would kill millions of Brits and overwhelm the NHS.

The military has to be cut and there's no place for free hotels for people who cross on boats. If people want to claim asylum they should declare it at our border with immigration...We have to focus on the important issues here at home...

I'm not for more taxes but I struggle to find another way other than tax increases.

They are on track to crash the economy. However, I'm astonished at the speed of the chaos, corruption and decline.

Hold on tight, it will be painful, but won't last long. Reform/Conservatives will take over. One term party.

Country is in managed decline, not sure there's any reversing it now. Importing millions of immigrants to try and create an illusion of a growing economy is no longer working.

@HermoineFairfax

"Hold on tight, it will be painful, but won't last long. Reform/Conservatives will take over. One term party."

I don't doubt that it could quite well be a one party term.

I also don't disagree that there is a strong chance of some kind of Reform/ Conservative grouping being elected (if they stay split then Labour will be re elected).

As always the voters will think "well Reform / Conservatives can't do a worse job than Labour "

However I just don't see how a future Reform/ Conservative Government could do any better than Labour given the current state of public finances and remember Reform's policies at the GE were massively underfunded and would have seen national debt soar even higher that would have crashed the economy on a bigger scale than even Liz Truss could manage.

Any politician proposing the type of policies that would fix this managed decline would simply never get elected.

@dubsie

"How on earth do you cut the NHS when we have record waiting lists and cutting state pensions would kill millions of Brits and overwhelm the NHS.

The military has to be cut and there's no place for free hotels for people who cross on boats. If people want to claim asylum they should declare it at our border with immigration...We have to focus on the important issues here at home...

I'm not for more taxes but I struggle to find another way other than tax increases."

On the NHS the current solution is to increase supply of services by pumping more money into it but this does nothing to reduce demand. Whenever something is free at point of use or at least underpriced then demand will always outstrip supply leading to demand being managed by the ability to queue whether that be concert tickets or former Soviet Union queues at shops. The solution is to introduce some form of low charge to access your GP or A&E - high enough to discourage unnecessary visits but low enough that the low incomes can still access it - a bit like the 10p charge on carrier bags that massively reduced demand.

On the state pension, it's difficult to cut the pensions of those who are already retired as they have limited ability to re access the job market. However it is possible to push back the retirement age by say 3 months every year.

You have a valid point on defence spending and the cost of asylum seekers but to be honest the amounts involved here are small and will not make much difference.

I also agree that there will have to be some tax rises as well. Personally I would recommend CGT on primary residence as well and a general shift to increase tax on wealth rather than income. Lastly I would propose a big increase in taxes on alcohol sold at supermarkets- although this would at best only raise say £5 billion.

@User135644

"Importing millions of immigrants to try and create an illusion of a growing economy is no longer working."

Importing cheap labour whilst having 9 million economically inactive in the UK is insane.

Quite simply if Amazon couldn't find UK nationals to be their drivers at the salaries they are willing to offer then Amazon would have the choice of either not delivering them and going bust, getting the Royal Mail to do it or maybe increasing the salaries to a point where UK nationals are willing to do the job.

You won't turn up for cancer treatment unless you have cancer....I'm sorry charging at the point of use won't help your survival rates of key killers.

Your GP is the gateway to all your care needs.. charging for it would simply harm early detection of things like diabetes, cancer, heart disease, Asthma.....late detection costs more money.

We are already the sickest country in Europe...this would make it worse

@dubsie

"You won't turn up for cancer treatment unless you have cancer....I'm sorry charging at the point of use won't help your survival rates of key killers."

True for cancer treatment but you won't turn up for a GP appointment that might detect the first signs of cancer if there is a two week wait for an appointment or go to A&E for a broken finger or a torn knee ligament if there is a 6 hour wait. Meaning that when treatment does occur it is more complicated/ expensive to fix.

If a service or product is free then demand will be managed by the ability to queue or wait rather than an ability to pay. Whilst this is better for those who are financially poor it is clearly worse for those that are time poor.

By introducing a small fee to access A&E or your GP it hopefully strikes more of a balance between money and time.

The country needs to earn more rather than be taxed more. Raise the retirement age and make work pay by reforming the benefit system, getting people off benefits if they can work. Most people want to work but currently it's often better financially to be on benefits. And forget the Employers NI rise as that's really killing the golden goose as the economic engine of this country is mainly made up of small businesses.

And stop the quantitative easing, world, otherwise we are really stuffed.