Budget 2018 (3 Viewers)

Captain Dart said:

What is Hammond going to do, bland out or pull some rabbits out of the hat?

I think Gove is behind the plastic packaging tax initiative & I'm for it myself, we create too much rubbish, its unsustainable, I see it like the clean air acts of the 60's.

What do you think he'll do? I think.

Plastic tax - as above.
Car tax - above inflation increases, easy hit.
Fuel Duty - Diesel to be hit most.
VAT & NI - no changes
Income tax - allowance increases as planned
Student loans - above inflation raising of repayment threshold
Local Tax - make students landlords liable for their tenants
Stamp Duty - some cuts aimed at 1st time buyers
Housing - more building, probably a little disappointing
Pension- reduction in annual relief threshold (currently £40K/pa gets tax relief)
Public sector pay - above 1% but not as much as 3%, say 1.5%
Brexit - extra spending

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I think you are close on all of the above, small offerings to try and deflect some of the pressure. it's time to spend some serious cash on housing in this country and change the way the rental market works.

Captain Dart said:

What is Hammond going to do, bland out or pull some rabbits out of the hat?

I think Gove is behind the plastic packaging tax initiative & I'm for it myself, we create too much rubbish, its unsustainable, I see it like the clean air acts of the 60's.

What do you think he'll do? I think.

Plastic tax - as above.
Car tax - above inflation increases, easy hit.
Fuel Duty - Diesel to be hit most.
VAT & NI - no changes
Income tax - allowance increases as planned
Student loans - above inflation raising of repayment threshold
Local Tax - make students landlords liable for their tenants
Stamp Duty - some cuts aimed at 1st time buyers
Housing - more building, probably a little disappointing
Pension- reduction in annual relief threshold (currently £40K/pa gets tax relief)
Public sector pay - above 1% but not as much as 3%, say 1.5%
Brexit - extra spending

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Totally agree.
Gove seems to really getting into his new role.

There are shops opening up now which are a throwback to the old days where you bring your own containers and they put the goods into them which I think is a great idea.

As for housing, he said he wants to build 300,000 new house a year though he didn't say when it would start. That's an ambitious target.

A better idea for student loans would be to decrease or remove the interest charged, rather than increasing the threshold.

I also think the plastic tax is a great idea. So wasteful the amount created that then can't be effectively recycled.

Captain Dart said:

You are a fool, most students will never earn enough to pay back the full debt therefore cutting the interest ensures that the better paid will be taxed less in the long run.
Why cutting the student loan interest rate will only help richer graduates… - Martin Lewis' Blog...

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Point taken.

Captain Dart said:

You are a fool, most students will never earn enough to pay back the full debt therefore cutting the interest ensures that the better paid will be taxed less in the long run.
Why cutting the student loan interest rate will only help richer graduates… - Martin Lewis' Blog...

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May as well have a more progressive tax system, and do away with the loans...

What does the "second devolution deal for West Midlands" entail?

clint van damme said:

What does the "second devolution deal for West Midlands" entail?

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I'm going to take a wild guess it means more money to Birmingham and nothing for us.

Any pay rises for public sector?

Ian1779 said:

Any pay rises for public sector?

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:beaver:

Bit of a nothing budget really. Other than confirmation that the magic money tree has sprouted a couple of more branches. Hardly surprising given the amount of horse shit the government feed it.

A nothing budget by a nothing chancellor in a nothing government.

Why somebody who is 29 needs discount train travel but a 31 year old doesn't I have no idea.

skybluetony176 said:

Bit of a nothing budget really. Other than confirmation that the magic money tree has sprouted a couple of more branches. Hardly surprising given the amount of horse shit the government feed it.

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Tony, if I thought for a second that you understood the economic environment that Hammond is facing, then I'd debate with you. As it is, I'll just point out that you complain constantly that not enough is being spent and then complain when more is spent, albeit without throwing everything into the air and abandoning necessary constraints.

Anyway, the big positive for me is that even with the OBR's dour predictions on growth, borrowing will reach an apex versus GDP this year and start to fall soon.

mrtrench said:

Tony, if I thought for a second that you understood the economic environment that Hammond is facing, then I'd debate with you. As it is, I'll just point out that you complain constantly that not enough is being spent and then complain when more is spent, albeit without throwing everything into the air and abandoning necessary constraints.

Anyway, the big positive for me is that even with the OBR's dour predictions on growth, borrowing will reach an apex versus GDP this year and start to fall soon.

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"OBR's dour predictions on growth"

I wonder why that is?

"borrowing will reach an apex versus GDP this year and start to fall soon."

Good news, as long as the projected growth and revenues stay on target, there seems to be a lot of downgrading going on at the minute

clint van damme said:

"OBR's dour predictions on growth"

I wonder why that is?

"borrowing will reach an apex versus GDP this year and start to fall soon."

Good news, as long as the projected growth and revenues stay on target, there seems to be a lot of downgrading going on at the minute

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They explained in their report why that was - productivity. These have been out for a while - read several articles over the last weekend on their predictions. They may be overly pessimistic - we will see.

mrtrench said:

They explained in their report why that was - productivity. These have been out for a while - read several articles over the last weekend on their predictions. They may be overly pessimistic - we will see.

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I read these are the lowest ever growth predictions over the course of an entire budget but it was on Twitter so may not be true.
Lack of productivity is a double edged sword. It won't improve without spend on things like training and infrastructure but that means more borrowing or more cuts elsewhere.

clint van damme said:

I read these are the lowest ever growth predictions over the course of an entire budget but it was on Twitter so may not be true.
Lack of productivity is a double edged sword. It won't improve without spend on things like training and infrastructure but that means more borrowing or more cuts elsewhere.

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There are huge investments in infrastructure (HS2 and crossrail) but they aren't there yet. But I agree. And yet the majority of the investment has to come from private commerce.

I think the biggest factor is all tied up with low-skilled labour and pay. Because labour is cheap, firms have no incentive to invest in tools to increase productivity. I think this is tied up with an over-supply of cheap labour from the EU, but... given unemployment is so low and net immigration is starting to fall (but still positive), I'm more optimistic that higher wages will come and that in its turn will increase investment and productivity. So I'm more optimistic than the OBR: but only if a) Brexit talks go well b) the government can hang on. I know we differ on the effects of the Labour party's plans so let's take it as a given that you disagree with me on the Tories hanging on being a prerequisite for improved productivity and growth.

mrtrench said:

.....
Anyway, the big positive for me is that even with the OBR's dour predictions on growth, borrowing will reach an apex versus GDP this year and start to fall soon.

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When they're constantly missing targets, juggling the forecasts from one session to the next, plus all the dilemmas around Brexit...how anybody (not just the tories, the independent advisory bodies) can predict the growth by 2022 amazes me. Phil's going on about balancing the books by 2025 now - thought all the pain we've had to endure with Osborne was supposed to have virtually wiped that out by now?

mrtrench said:

There are huge investments in infrastructure (HS2 and crossrail) but they aren't there yet. But I agree. And yet the majority of the investment has to come from private commerce.

I think the biggest factor is all tied up with low-skilled labour and pay. Because labour is cheap, firms have no incentive to invest in tools to increase productivity. I think this is tied up with an over-supply of cheap labour from the EU, but... given unemployment is so low and net immigration is starting to fall (but still positive), I'm more optimistic that higher wages will come and that in its turn will increase investment and productivity. So I'm more optimistic than the OBR: but only if a) Brexit talks go well b) the government can hang on. I know we differ on the effects of the Labour party's plans so let's take it as a given that you disagree with me on the Tories hanging on being a prerequisite for improved productivity and growth.

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Would the HS2 budget, which is huge, be better spent on improving current infrastructure and training?
I worked with a contractor who lived close to part of the route so he'd looked into it quite a bit and though HS2 was a massive waste of money that would be better spent in the areas I've mentioned. It's not something I know a great deal about.

mrtrench said:

Tony, if I thought for a second that you understood the economic environment that Hammond is facing, then I'd debate with you. As it is, I'll just point out that you complain constantly that not enough is being spent and then complain when more is spent, albeit without throwing everything into the air and abandoning necessary constraints.

Anyway, the big positive for me is that even with the OBR's dour predictions on growth, borrowing will reach an apex versus GDP this year and start to fall soon.

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You seem to be confusing enough with more. They don’t amount to the same thing and quite often in real terms equate to a cut when all things are considered.

clint van damme said:

Would the HS2 budget, which is huge, be better spent on improving current infrastructure and training?
I worked with a contractor who lived close to part of the route so he'd looked into it quite a bit and though HS2 was a massive waste of money that would be better spent in the areas I've mentioned. It's not something I know a great deal about.

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It would be better spent on almost anything than hs2 which is a government way to move cash into their mates businesses, I bet they wouldn't dare ask the people if they think it's a good use of money as they no the answer will come back no

Why on earth are they questioning McDonnell on nationalisation, which would be years after a Labour win with no election due until 2022, on the day of a Conservative budget?

Terry Gibson's perm said:

It would be better spent on almost anything than hs2 which is a government way to move cash into their mates businesses, I bet they wouldn't dare ask the people if they think it's a good use of money as they no the answer will come back no

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HS2 is infrastructure (replying to Clint). And taking the opinion of some bloke who lives near to the route as an expert voice doesn't cut it for me. I also know next to nothing about the economic benefits from a faster train service; although I'm pretty sure I could build a model I don't know the value of realistic input parameters*. Has it been done? Does anyone have any links? Because a proper independent model of the benefits is the way to determine if it's worth it. What I will say, is that it's an attempt to encourage economic growth beyond London - and so it cannot be all bad.

I'd take you more seriously Terry if you avoided daft conspiracy theories.

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* Project productivity benefits over 50 years. Project wealth and GDP benefits over 50 years (and importantly the distribution of that: does it mean that more jobs stay in the UK because instead of off-shoring firms choose onshore remote sites? Does it mean that better paid jobs in the Midlands and the North mean fewer people are dependent on benefits?)

Take all this data and project the benefit to tax income for each year. Discount that benefit to a total as of completion date. How many years of the discounted projection are needed to equal the project investment cost?

Note that this is slightly different from a standard Return on Investment (RoI) calculation because the benefits will differ each year following completion.

I'd be suspicious of any claim that it wasn't worth the investment that didn't quote the payback time in years. That includes people who think that it's a conspiracy to pay money to the rich... even though it was an initiative started by Labour.

Captain Dart said:

McDonnell talks complete nonsense & can't explain how he is going to raise money for all his hare brained schemes. Neil owns him.

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He really is a fuckwit. God help us.

mrtrench said:

HS2 is infrastructure (replying to Clint). And taking the opinion of some bloke who lives near to the route as an expert voice doesn't cut it for me. I also know next to nothing about the economic benefits from a faster train service; although I'm pretty sure I could build a model I don't know the value of realistic input parameters*. Has it been done? Does anyone have any links? Because a proper independent model of the benefits is the way to determine if it's worth it. What I will say, is that it's an attempt to encourage economic growth beyond London - and so it cannot be all bad.

I'd take you more seriously Terry if you avoided daft conspiracy theories.

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* Project productivity benefits over 50 years. Project wealth and GDP benefits over 50 years (and importantly the distribution of that: does it mean that more jobs stay in the UK because instead of off-shoring firms choose onshore remote sites? Does it mean that better paid jobs in the Midlands and the North mean fewer people are dependent on benefits?)

Take all this data and project the benefit to tax income for each year. Discount that benefit to a total as of completion date. How many years of the discounted projection are needed to equal the project investment cost?

Note that this is slightly different from a standard Return on Investment (RoI) calculation because the benefits will differ each year following completion.

I'd be suspicious of any claim that it wasn't worth the investment that didn't quote the payback time in years. That includes people who think that it's a conspiracy to pay money to the rich... even though it was an initiative started by Labour.

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You seem to be implying a bit of nimbyism and to be honest it did cross my mind when I was talking to the guy.

clint van damme said:

You seem to be implying a bit of nimbyism and to be honest it did cross my mind when I was talking to the guy.

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Not deliberately implying it - who knows maybe? What I'm trying to say is that an opinion on whether it's a good thing economically or not is useless unless the economic benefits have been modelled and they know the results. Of course people can still argue over the parameters for the model, but the model itself is pretty vanilla.

To comment on some of the things being said about the budget and by McDonnell:

1) House prices and stamp duty. Removing stamp duty for first time buyers will indeed over time increase house prices. This is why: house prices are all about supply and demand. They are high because demand exceeds supply. By making houses more affordable for first time buyers it will increase the ability to buy (and hence demand) at the starter end of the market and over time prices will rise. However that will not be immediate. The only way to resolve the high price crisis is to increase supply (build more houses) or reduce demand (and the only thing we can control - after Brexit - is net immigration). If the government succeeds in building these extra houses and curbing immigration then over time that will solve the problem. My guess is that Hammond has put the stamp duty cut up there as a temporary fillip until all these new houses exist.

2) Renationalising utilities won't increase debt because Labour would issue government bonds to pay for it. This is hogwash. Almost all government debt is raised by issuing bonds. The bond markets give nicknames to different kinds of bonds. For example, "junk bonds" are bonds that have a high credit risk (the risk of default) and hence pay a higher interest. UK government bonds are called 'gilts'. Gilts usually pay the lowest rates of interest because the credit risk is deemed low or zero. Gilts are issued for a range of maturities and the yield (the effective rate of interest received by the investor) varies according to the residual maturity. McDonnell mentioned paying 2% interest and that sounds about right for 20 year gilts at the moment. The kind of investors that buy gilts want low risk and are willing to accept a low rate of return in order to have near certainty that they won't lose their money - this is ideal for pension funds and that's why pensions invest heavily on gilts. I've seen comments on social media claiming that it's Rothschild's bank that is benefiting from the debt. I can only assume that this is driven by antisemitic hatred, because it's complete tosh. There is no way that Rothschild's could afford to fund the nation and they wouldn't be interested in such a low rate of return anyway.

But there are only so many pension fund investors. If you increase the supply of gilts such that the demand is all taken then the interest rate will increase - the Bank of England must price them to sell.

3) Nationalising utilities will 'pay for itself'. Up to a point. I ran some figures on Northern Electric and if gilt yields stay the same (2%) then McDonnell could afford to continue NE investment at current rates and reduce prices by 20% and still make a profit (from dividends). However, think about what will happen. Investors in utilities currently get a dividend yield of some 5%. They are not interested in gilts and so they will sell them into the market for pension funds etc. to buy. That increases supply of gilts and so the yield on gilts rises... and the cost of government debt increases (on *all* of it - not just the gilts issued to nationalise). It's important to understand how this works. Gilts pay a fixed rate of interest, so if 20 year gilts are issued today they will only cost 2% for all of those 20 years. However 20 year gilts issued 20 years ago will be maturing. Whilst the UK runs a deficit it has to sell more gilts to pay back those maturing. This happens constantly. Even when in surplus some gilt maturities will be paid back with more borrowing. Imagine the cost of 5% of all government debt rising by 0.1% every year (5% assuming that on average gilts last 20 years). That would be £90m extra every year (accumulating: 90m in year 1, 180m in year 2...). And 0.1% is a very conservative number - it could in reality be much much higher.

4) UK interest payments are reducing. Not true, and they are forecast to increase significantly over the coming years. They were falling from 2010 to 2016 but they are now increasing and circa £50 billion a year. That's approaching half of the cost of the NHS. This is why: when interest rates fell from 2008, the cost of replacing maturing gilts went down and this more than adequately compensated for the increased borrowing (the deficit). However as the borrowing continued to increase the benefit of the reduced interest became less significant. Now that interest rates are rising again the costs are increasing.

I know the theory but I don't know realistic numbers - but is it a good thing to borrow even more just now for nationalisations when it could put even more significant pressure on public finances? What benefit would renationalising have for the public purse (I understand that if they could cut prices by 20% it would benefit users of the services - but for how long if government finances are under the cosh)? None that I can see: it doesn't create more jobs. It's just ideological. And what happens when you put Trade Union powers back into the mix? When the shit hits the fan with finances, how will McDonnell be able to control expenditure on these utilities or reduce the price cuts without strikes and union battles?

This is why I call McDonnell a fuckwit. I used to believe that he might really understand the implications and was lying. But from his performance in that video it's clear to me that he really is well out of his depth. It's almost like a taxi driver has wandered into the HoC and invited to become Shadow CoE.

Now a couple of days have passed you have to say fair play to the tories. They haven’t had to embarrassingly make the monumental climb downs we witnessed after the last budget. It may be a nothing budget but compared to the last one we’d have to class this as progress. Of sorts.

mrtrench said:

I know the theory but I don't know realistic numbers - but is it a good thing to borrow even more just now for nationalisations when it could put even more significant pressure on public finances? What benefit would renationalising have for the public purse (I understand that if they could cut prices by 20% it would benefit users of the services - but for how long if government finances are under the cosh)?

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Just dipping by, but my answer is... yes, yes it is appropriate.

Personally I wouldn't cut prices. You talk about ideological, but certain industries were definitely privatised because of an ideological crusade, not for any long-term sense... and certainly the income was a short-term gain as the family silver was sold off.

The idea is that if industries make a profit, that money is then channelled into other services as the profit goes back into the public purse, rather than to outside investors. In the case of utility companies, the irony is that often the money in the form of dividends gets channelled back into other countries' nationalised industries, as they have been allowed to buy ours!

When it comes to the railways, it was absolute madness to end up in a situation where we have to subsidise loss-making routes, whilst profits on the popular ones end up not cross-subsidising those loss-making elements, but instead half the time go to outside investors.

When our industries were privatised in the 80s, you could make a case for some of them (British Leyland being a case in point, although arguably we'd have been better off following the French model with Renault, investing in new tooling and new models, and therefore still having a national car making industry, as opposed to profits going to other countries) but areas such as the public utilities and the rail service were utterly bonkers.

Long term, we're far far better off bringing them in-house.

And yes, I will add the ideological element that it's scandalous to make money out of people staying warm and drinking water. That should be about the service first, and profit second.

And as an aside, if you do cut prices of utilities, then that means people have more disposable income to spend elsewhere, therefore boosting the economy.

Or... they have more disposable income to swallow a tax hike to pay for other services, therefore allowing it to be a relatively painless redistribution of finances.

Deleted member 5849 said:

Just dipping by, but my answer is... yes, yes it is appropriate.

Personally I wouldn't cut prices. You talk about ideological, but certain industries were definitely privatised because of an ideological crusade, not for any long-term sense... and certainly the income was a short-term gain as the family silver was sold off.

The idea is that if industries make a profit, that money is then channelled into other services as the profit goes back into the public purse, rather than to outside investors. In the case of utility companies, the irony is that often the money in the form of dividends gets channelled back into other countries' nationalised industries, as they have been allowed to buy ours!

When it comes to the railways, it was absolute madness to end up in a situation where we have to subsidise loss-making routes, whilst profits on the popular ones end up not cross-subsidising those loss-making elements, but instead half the time go to outside investors.

When our industries were privatised in the 80s, you could make a case for some of them (British Leyland being a case in point, although arguably we'd have been better off following the French model with Renault, investing in new tooling and new models, and therefore still having a national car making industry, as opposed to profits going to other countries) but areas such as the public utilities and the rail service were utterly bonkers.

Long term, we're far far better off bringing them in-house.

And yes, I will add the ideological element that it's scandalous to make money out of people staying warm and drinking water. That should be about the service first, and profit second.

And as an aside, if you do cut prices of utilities, then that means people have more disposable income to spend elsewhere, therefore boosting the economy.

Or... they have more disposable income to swallow a tax hike to pay for other services, therefore allowing it to be a relatively painless redistribution of finances.

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If debt were 40% of GDP and we were adding 1% on top I could agree with you. But it isn't, and I have explained why it's a bad idea now.

mrtrench said:

If debt were 40% of GDP and we were adding 1% on top I could agree with you. But it isn't, and I have explained why it's a bad idea now.

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And I've explained why it's a good idea.

We're never going to agree on this I suspect, c'est la vie One day Keynes may come back into fashion... and if only (in my view) we'd taken the Keynesian approach in the 1930s...