A desperate situation (the economy)

well, when you say "rich people" you need to define exactly what youre talking about in terms of earnings per annum. labour did this in the 70's, put a high band of tax on the highest earners. those highest earners simply went offshore and / or undertook complex tax planning measures. thats what will happen again if that happens. if the govt look at that, then they d need (imo) to bring in a "superband" at around £100,000 a year gross. still the treas makes most of its money from corporate tax, and they cant introduce a superband for that, because the biggest firms will simply move their head office ops to another country. this is why the so called windfall tax threatened ont he utilities never materialised - the firms hold too much power over the govt, just as the banks are doing now by refusing to fully ass on the rate cut.

re footballers, i know a couple of premiership footballers, and they run tax efficient companies. they have an offshore based firm, which is contracted to the club to provide football services. the club pays the offshore firm at its offshore base, and the player brings back enough money onshore to live etc, and it is that amount on which he pays tax - the bulk of the money remains offshore - tax free.

I think there will have to be an income tax cut, plus the freeze on road tax.

An income tax cut will just make people FEEL richer, when the Daily Mail has it's 'average hosehold £300 a year better off' headlines.
I think something like that, coupled with the fuel prices falling and cuts in gas/electric, if they can get REPORTED, will make a difference to people.

I think the companies NI cut if you employ someone who has been unemployed for 3 months + is a complete load of bollocks.

I also think the interest rate is now ridiculously low - down to a level that banks won't pass on, and I can't see how it's going to benefit people? Surely more people will take their money off shore to better value accounts (which I understand are still around)

L
xx

I meant rich as in rich like pop stars and footballers, rich as in people who ahve worked their butt off to get where they are are fine ? (again, like my fellow bubble mate said, it's all tongue in cheek here)?

well, thats one problem, its not the only problem. the BoE cant act as a lender to individuals. that means that the taxpayer is lending money to himself. however, in a roundabout way this IS going on with Northern Rock, at least until its out of the shit

Decrease the percentage of profits the supermarkets get - sure they have overheads but 50% is a lot, this would make food far cheaper, their profits would decrease but I suspect not enough to enforce redundancies, same goes for rail companies etc, all the things the public need that have huge profit margins.

Similarly landlords need to be less greedy, where I live a lot of rents have doubled and the shops just can't afford this. This means shops lay empty, landlords get nothing coming in, jobs are lost etc etc

Why can't the BoE lend to individuals though? When you say they can't act as a lender, what's the reason behind that? Am I missing something really obvious by asking?

Do you think the stamp duty 'holiday' would help the market?

Sack Brown for a start - the man was chancellor for 10 years so should have had some idea of what was going on in the financial markets !

I think a big problem is the lack of confidence in the market - the banks won't lend money, consumers are tightening their belts and not spending as they are scared of lsoing their jobs, the retailers are suffering as people are not spending and so there are more job losses and round it goes again ( I realise this is a very simplistic view).

Brown has spent all the cash and even though the government have brought forward a huge chunk of the planned public spending, it is not enough to kick start the economy again. I'm not convinced that if taxes are cut, it would mean that consumers would be willing to spend the extra money they are getting.

i agree with all of that, but the treasury cannot afford to give a tax cut, unless it raises tax somewhere else. they just borrowed 750 billion and need to service that debt. when the treasurys income falls, as it is doing now, they cannot see it fall again via a tax cut, the see-saw would have to swing up the other way.

I seriously doubt that the number of successful pop stars and footballers has that much effect on the economy as a whole - the overwhelming majority of footballers, musicians and actors earn well below the national average wage!

I read somewhere that the average British film producer pulls in a salary of £15,000, for all the cigar-chomping mogul image! And I managed less than that when I was in the business, as JK will ruefully confirm! ? Still, at least we didn't get clobbered by the taxman, as there were no profits to tax!

I don't believe there is any quick fix. I'm no financial expert, but even with my rudimentary A level economics knowledge I'd have thought there has to be a certain element of letting the 'downturn' take its course. We were taught that economies do run in cycles and that the peaks and troughs can be more / less marked, but that this is part of the 'natural' cycles (if anything about economics can be said to be natural!). What we seem to have failed to do is plan for the dips. Enter Gordon Brown stage left with his 'end to boom and bust'. B******s, one might be tempted to say.....

I don't believe these are things you can legislate for in a free market

L
xx

I don't expect there is an immediate answer, except riding it out. I thought the idea of capitalism was to let the market ride it out and if there are casualties, tough.

I'd love to see the banks pass on mortgage rate cuts though. Yes, yes, LIBOR isn't Base Rate, yada yada, but no one talked about that when they were firing out letters passing on the rate rises. Even that though isn't helping as savings, endowments and pensions are all fcuked for the forseeable as well as the savings rate is through the floor. Although, there doesn't seem to be much of an impetus to save - it's all spend, spend, spend.

I'm so tired though of hearing whinging moanbags on the radio and tv going on about what a bad time they're having. Last week on NI news there was a woman crying about potentially losing her house. What was she doing to try and make the mortgage payments? Selling all the designer clothes she'd bought on her maxed out credit cards on T-Bay. I wonder why she was in such dire straits? Genius.

This awful notion of being entitled to "stuff" has to be put to rest. Rising house prices have given people a false sense of security - remortgaging to pay CC bills and loans, "safe in the knowledge" that the value of the house will just keep on rising.

I have friends that couldn't put their hands on £150 in cash if they needed to, but when she recently had a baby, bought a new Louis Vuitton holdall for going to hospital. They both "had to have" new I-Phones and she got a Mulberry bag as a well done on sprogging gift from her H. Their combined wage is about 75% of MrA's, but they spend like posh and becks. I know this, because she told me. I doubt they're alone.

There needs to be proper financial education and a masive sea-change in expectations in order to ensure we're better prepared for the next time.

Sorry, bit of a rant there. ? In answer to the original q, no I don't know.

Who would you replace him with - George Osborne? ?

With the exception of Vince Cable, it's hard to think of a current senior British politician who understands more about economics than Brown, and I doubt Cable's about to become Prime Minister (or Chancellor) any time soon. In fact, didn't he rubbish a suggestion that Brown replace Alastair Darling with him?

I like your points LouM. If the nation put less strain on the health service surely we'd save some money there. Maybe some kind of Wartime rationing/make do and mend type campaigns and ideas would help. But then, if we all made do and mended and didn't buy new clothes and grew our own veg then we wouldn't be putting money into retail. Hmm, it's a tricky one isn't it?

How about if the country started producing more things to sell, in this country and abroad? Then instead of lining other countries pockets quite so much, we'd be lining our own a bit more.

Sorry it's not very eloquent, it's hard typing with a clingy toddler on your knee!

Actually, I (as a civil servant) would also make the service more efficient, although not necessarily by cutting jobs or frontline services. I'd be looking at natural wastage of retirement not being replaced. And making the whole thing more professional.

I'll give you an example. I don't know how to work the photocopier. It has a code, and I don't have it because at my grade, someone else does any copying I might need. This is clearly preposterous, along with not opening my own post or doing my own filing. But, it keeps a lower grade in a job and is the way things have always been done and is pre-historic. But as it's a civil service, it's hard for any govt to make changes. There has to be a culture within that appreciates we've moved on a bit.

Also, I'd immediately go about closing all the tax loopholes that allow the super-wealthy to avoid paying in to the system. And on a personal note, I'd remove the British passport of people like Jagger, Lewis Hamilton, whoever, who are not quite so proud enough of being British to pay tax here.

But I am a bit of a pinko on the inside.

I totally agree Mr JK - I don't think there is anyone who could realistically replace Gordon Brown - I would love Ken Clarke to take over again but I don't think Gordon would let him somehow!!!?

I do find it frustrating that Brown is being hailed as some kind of hero for tackling the current financial crisis when as far as I am concerned, he was part of the problem that caused it.

The attitude of so many people nowadays was beautifully illustrated by the Panorama programme last night about people who had run up huge debts and then used legal loopholes to get out of paying.

I think there have been some very sensible arguments on here and a lot of it comes back to spending what you can afford and not what the banks are/were willing to lend.

I once worked in a situation where a PA went on maternity leave, and her replacement did all her usual work in just two or three working days. She was worried that she might not be doing it properly, whereas in fact she was so much better that we'd happily have offered her the job full time if it had been even vaguely legal. But when the original PA came back, her boss significantly increased her workload, as this proved beyond any doubt that she'd been eking it out as far as it would go.

I'm a real dimwit so I doubt my ideas are on any use but I think I'd:

Cut stamp duty or raise the threshold to get people buying houses again (and of course encourage the banks to get lending).

Cut tax on shares to get people investing in the stock market again.

Cut income tax and tax on fuel.

I realise that whilst these are good for the everyday person it's possibly not great for the country as they need all the money to repay the UK debt but in the short term I don't know what else can be done to get people feeling more positive about spending money.

Also, with regards to footballers, surely they will suffer at some point as well? If people are cutting back, won't they cut back on things like season tickets, merchandise etc, therefore meaning the clubs make less money and have less money for tasty wage increases?

I am really, really worried about next year and I'm almost certain we will lose our home. I have convinced myself of this, despite all still being ok at the moment.

I swear that in one post, I was actually told (by a superior) not to answer a letter too quickly in case it got out that we didn't have enoough to do.

My last post (am currently on a career break to look after the runts) was a completely made-up job, created purely to ensure the Director had enough senior grades in hs team to warrant a Directorship. The power games are atrocious. A friend of mine recently moved to a deputy-Clerk post in the NI Assembly. She's the same grade as me and an experienced officer, doing the work of a junior admin post, but the Assembly only want senior staff. Ludicrous. And I could go on all day about some of our public bodies, but would get into to much trouble if caught.

Hum. I was thinking about this earlier, actually.

I would whack up the tax/VAT on cigarettes and alcohol. Alcohol is currently going for silly prices in supermarkets as it is and pubs are dying on their arses anyway. I'm not sure people would be bringing home huge amounts of cheap foreign fags if they can't afford to go abroad in the first place. I doubt this would be very popular but it would save the NHS money in the long term (and perhaps the emergency services, too). There would of course be job cuts in these industries but I think these are on the cards eventually anyway.

Things like this would affect morale. I expect, but then morale is currently quite bad as it is and these are both areas that I think will be subject to further legislation in the future.

Oh and just to add to what MA said. I tempted for my LEA a few years ago and I could easily do a weeks work in two days. I was bored to death. The office was easily 60% overstaffed and still is. I am not saying this is the case with all offices but it worked at a very slow pace and flexi hours just made for lots of skiving. Plus the number of staff that really took the p!ss with sickness was unreal. There was a system to be played!

we live in a free market economy. what youre proposing is effectively half way towards communism.

cran, no, a SD holiday wouldnt do that much when its now very hard to borrow anyway, at anything like a reasonable rate. some banks wont lend at all unless the borrower has a 25% cash deposit, which not many people do.

I work for a private company, one which has cut back on expenditure massively over the last 4 years to prepare themselves for a harder market. My job's therefore perfectly safe, which is a great position to be in.

However, I wonder if your point above isn't true of many offices. I'm currently doing the work of 2 employees, and I still get days when I don't have enough to do. This week I'm doing the work of 2.5 employees (a colleague of mine does 50% the same role as me and 50% of another role, and he's off sick) and I STILL have time on my hands. I hate it.

I think all public bodies should be forced to cut costs. Put a hire freeze in place, have positions filled only if they meet strict criteria. Replace equipment like-for-like rather than upgrading where not necessary. Act like a private company, and tighten belts.

Marmalade Atkins - you are definitely right about more education being needed on managing your finances. Everytime I watch Spendaholics I am astonished that people have say 1k coming in and 2k going out. How do they think that adds up? Haven't they heard of Mr Micawber?

My mum is always saying as well that when she was at school they were taught how to balance housekeeping and cook healthy, cheap meals. Why can't they reintroduce lessons like those at age 15 or 16?

i agree - but sadly, due to labours obsession with health and safety, and the lack of budget for schools, they cant do it until the red tape is relaxed, which isnt going to happen anytime soon.

sMA - your point about taking away peoples passports, well, i m not sure if you meant it or not, but as a tax exile you cannot spend more than a certain number of nights in the UK in any given year. I think its absolutely fair enough that super high earners do this. you cant force someone to stay in a country which operates a free market.

Not sure that's the case - the NHS draws huge amounts of money from the tax on booze and fags, and people dying early relieves demand on the service.

I don't know what the answer is tbh, but I think to blame GB when the crisis is a worldwide one that began in the US is a little unfair.

Anyway, loml, who is clever and understands economics, says this

"The best route for the country is a temporary tax cut aimed at working families on relatively low incomes (as that money will get spent quickly) combined with some direct keynsian demand side stimulus for the short term, combined with long term investment in education, skills, infrastucture and a tax system structured to encourage R&D."

No, I don't understand the middle bit either ?

Re the passports Nick, I sort of do mean it and I know about the time restrictions here. I know it's unworkable in practical terms, but I'd certainly think twice about giving Honours to these people.

Yes, their names are bringing in tourism, record sales, secondary wealth if you like, etc, but the principle of it just annoys me. I hate that the elite can get away with contributing so very little in first-hand terms. As much as other people here hate "benefit cheats".

Of course, I certainly don't want to see a time when we're back to income tax at 80% for certain sectors, but there has to be a fairer way.

I think he means the Olympics ?

I am so glad that LOS'sL (who understands these things far better than me) agrees that a tax cut and Keynsian spend is the way to go. Hurrah!

He also agrees that Cameron has the economic nous of a pair of dirty socks, Lou ?

My (thankfully short) time in the civil service was similar to others' experiences. I went as a lawyer to the DTI with high ideals about public service. It took three weeks for me to get my boss to give me anything to do, then, when I presented him with my first draft a fortnight later, he told me that what I'd done in two weeks was supposed to take 18 months so could I please go away, sit on it and keep my head down for a bit ? It got to the point where I felt ashamed to receive my salary, so little was I doing, and I remember sitting in my office crying because I'd worked so hard to qualify etc and then thrown it all away by giving up my fabby City job to sit in a horrid office and do nothing at all. It was one of the worst times of my life. I ended up calling my old boss in the City and asking for my job back (which she gave me, thank God). I don't know how many people are similarly underused but it was a disgraceful waste of money and ability.

Soph, whilst the problems in the credit market are global, our economic problems are ours, and this has been coming for some time, way before any credit issues. the problem we have is that brown spent all the money we had, so now its pissing down, there is no money for the rainy day. this means that the govt cannot cut tax without raising it elsewhere.

think of it like this - lets say the treasury is mr a.

mr a earns 40 grand a year and has 2 kids. of that, he spends it all. so he borrows on his credit card to but other stuff, and has to service the debt, because he cant afford to pay it back. he can just about bumble along like this on a knife-edge. eventually, his firm cuts his wages (ie less tax money to the treasury) and suddenly, he doesnt have the cash to buy prosecco or decent parmesan, so he uses his credit card more. what he really needs to do is cut his credit card debt, but he cant, as he has no cash to pay it off. so he takes out a loan. for a while he can buy prosecco again. then his firm cuts his wages again. now he is struggling to service the debt from the credit card, and the loan. so he takes out another loan. effectively he is insolvent. he cant buy presents for his kids, cant clothe them etc. he cant give them pocket money as there is no money to give, and despite them whinging at him there isnt much he can do. he could give them both a fiver, but that would mean that he would have to cancel their next school trip.

the only way out for him is for his firm to significantly raise his salary (ie, more income to the treasury). but his firm is struggling, and cant raise his salary - in fact, his salary is dropping. he is involsvent. this is the problem the government has, and is the situation that they find themselves in.

things have seemed to have calmed down media wise, but we ARE in a desperate situation. it isnt an understatement.

also, lomls assertion that spending on education and r&d will help isnt right, it wont. there is no money to spend, plus, we as a nation are not competitive in global markets when it comes to manufacture. our wages in the UK are high, the workers are lazy (relatively speaking), there is too much red tape a nd all other fixed costs are high. we cannot compete (for example) with an indian firm who can make a dress for 50p, its simply not possible. the only way for things to improve is for the government to reduce the red tape burden, massively cut public spenidng, and THEN cut tax and drop VAT or reduce vat on certain goods. oh, and force the banks to lend at rates of say, 1 above base, and slacken the lending criteria a little.