Looking Back On 14 Years Of Austerity - For What?

It might not sound fair to some, but I am in favour of a higher IHT bill when someone leaves their wealth to someone other than their own direct child. So if Aunty Flo or cousin Bill or the next door neighbours are beneficiaries, then they should be the ones clobbered with a crippling tax bill. Maybe 60+% of the estate. They would just have to make do. I also think the seven year survival rule is pointless, but that's a separate issue.

Katie, house prices have risen considerably and paying CGT on the gain would likely mean you could not afford to move, or to pay off your mortgage. CGT would be levied on the gain regardless of how much equity you have in the house.

If the IHT threshold were removed then 40% of every estate, no matter how small, would go to the state. For those who don’t own their home, that’s 40% of whatever they have scraped together over their lifetime.

Why make such suggestions ‘tongue in cheek’?

“Applying CGT to the sale of one’s only home would bring the housing market to its knees - people couldn’t afford to move and it would rock the mortgage market, throwing many into potential negative equity.”

That really is scaremongering, you only pay CGT on the “gain”it can’t put a house into negative equity. The amount paid would be small for those with mortgages because their equity is restricted, those with full ownership would be paying much more but they have the cash to pay the tax.
It would certainly put a damper on house price inflation which is good for first time buyers.

The value of Estates declared for IHT each year is around £100 billion abolishing tax free allowance on IHT would raise £40 billion a year, that would make a difference to services in the UK, beneficiaries would just have to make do with 60%.

All of this is very much tongue in cheek I don’t see any government actually making those changes but there is a lot of untaxed wealth that could contribute.

Katie, the highest rate of income tax at present is 45% but I agree that increasing it would be a disincentive.

Even Starmer has ruled out a wealth tax. Many are asset rich but cash poor. Applying CGT to the sale of one’s only home would bring the housing market to its knees - people couldn’t afford to move and it would rock the mortgage market, throwing many into potential negative equity. And do you realise that the IHT threshold has remained unchanged since 2009; the main residence allowance was introduced in 2017 - reducing either of these would bring so many ordinary people’s estates into taxation that no sensible government would consider it. You seem to think that only Conservative voters are wealthy - that is far from the case.

They haven’t delivered the plan that austerity was going to produce

Germanshepherdsmum

A increase in income tax would affect many of us.

The only property tax we have, apart from capital gains tax on sale of a property which isn’t your principal private residence, is stamp duty land tax. Increasing that would affect many people wanting to buy a home, as well as businesses seeking to expand.

As regards IHT, you will know that the threshold doesn’t start at £1m for everyone by any means.

Presumably you don’t live in the SE, where quite modest homes are valued at over £1m.

Top rate income tax is 50% increasing that is a disincentive.
It’s the wealth that needs taxing maybe annually by increasing Council Tax, on sale by applying CGT or cutting IHT allowance.
Tory voters won’t like it one bit, but it’s not likely to be a Tory government next year.

I love this. What Tory rule does to us all!

However, if everyone is happy with the status quo; with an economic system that works against the poor and allows the wealthy to become wealthier, where more and more people fall into poverty every year and food banks proliferate, schools fall apart, rivers and seas get choked with sewage and hospital waiting lists get longer and longer, councils have to close libraries and sell their assets so as to provide pared down very basic services, where criminal cases take years to get to court, I really cannot do anything about it, can I?

It seems many people in general are more than happy with this Maizie, as long as they can hang on to their ‘hard earned’ wealth.

What a selfish generation we are, overall. We didn’t accumulate all this personal wealth solely through our unique talents and capacity for hard work. We accumulated it because we were lucky enough to be (mainly) born post war, into a newly formed welfare state, where we enjoyed all the benefits of free education, health care, secure jobs and a political will to create a better country. This helped our generation to enjoy an unprecedented level of social mobility which has given many of us a comfortable later life.

Our children and grandchildren’s generations do not enjoy these advantages, and social mobility has decreased accordingly. Are we the first generation not to want our children and grandchildren to have better lives than we had? Or is it ok as long as our own children and grandchildren are doing ok? Even those that are have the odds stacked so heavily against them that they can never hope to achieve what we took for granted.

A increase in income tax would affect many of us.

The only property tax we have, apart from capital gains tax on sale of a property which isn’t your principal private residence, is stamp duty land tax. Increasing that would affect many people wanting to buy a home, as well as businesses seeking to expand.

As regards IHT, you will know that the threshold doesn’t start at £1m for everyone by any means.

Presumably you don’t live in the SE, where quite modest homes are valued at over £1m.

Germanshepherdsmum

It’s very easy to call for higher taxes if that would have little effect on you. When people call for higher taxes they generally want high earners to pay more tax, and for capital gains tax and dividend tax to be increased.

As it happens it would affect me, I believe property tax and inheritance should be taxed more, income tax is probably high enough it’s the capital taxation of all property that should be increased.

I do not expect the millionaires on Gransnet to agree with me

We don't need higher taxes. Spending would generate a higher tax take. Taxation really doesn't fund spending.

The USA is the very last example we should be following. That is what has got us where we are now. And what an awful place it is to be poor in, or to have a condition that you can't afford to pay for the treatment of.

I simply don’t accept that providing more services to the population free of charge to everyone actually works for the UK.

How many times do I have to explain the multiplier effect before anyone understands it? GDP measures the value of economic activity in the domestic economy. Every pound the state invests in the NHS generates £4 worth of economic activity, so that is an additional £4 of GDP. This applies to most state spending except, apparently, defence spending.

Too much is given away making the rich richer,

The rich get richer because the tax system allows them to hang on to more of their wealth than it does people in employment or on benefits. The tax system can be changed. It's not set in stone that the wealthy should be advantaged by it.

However, if everyone is happy with the status quo; with an economic system that works against the poor and allows the wealthy to become wealthier, where more and more people fall into poverty every year and food banks proliferate, schools fall apart, rivers and seas get choked with sewage and hospital waiting lists get longer and longer, councils have to close libraries and sell their assets so as to provide pared down very basic services, where criminal cases take years to get to court, I really cannot do anything about it, can I?

All I can say is that it could be different, even if we only reverted to the Keynesian economics of the post war years. But people plainly don't want it to be any different. Just to have a bit moan about it...

People who choose private healthcare can do that even if taxes go up. Their choice. I’d pay more taxes to ensure good health, education and other services were ensured for everyone

You mean ‘well off people who choose private healthcare and education would have more to spend’. I doubt it, they would still have those preferences.

Yes, and if the basics are provided (health, education etc) then people have more to spend anyway, as although they are paying more tax they don't need to fork out for those things themselves.

It’s very easy to call for higher taxes if that would have little effect on you. When people call for higher taxes they generally want high earners to pay more tax, and for capital gains tax and dividend tax to be increased.

It doesn’t work for the USA. Children’s Services go cap in hand to businesses to beg for funds.
We can afford to fund good public services, in fact as evidence before our eyes shows, we can’t afford not to
Look at the Sweden, high taxes, good services, lower crime, fewer mh/drug problems

If taxes were higher there could be more efficient social services that allowed everyone to get the things they need. It would only work if everyone had to pay in, but there is no reason why it shouldn't work if a social contract were drawn up and properly enforced.

In countries without a welfare state people have no choice but to work until they drop, can only be educated if their parents can pay for them to learn to read, and if people take ill they simply die. That is surely not what people want in the UK?

Maisie you can quote economic theory all you like but I simply don’t accept that providing more services to the population free of charge to everyone actually works for the UK. Too much is given away making the rich richer, to balance the books in the UK taxation rates would need to be much higher

It probably works for the US and other countries where services are free to the poor and those that can afford it pay for those services through insurance or directly as needed. In many cases lower taxation rates enable higher earning workers to afford to buy the services they want.

flappergirl

The Tories have ensured that the generation coming through will have no teeth by the time they are 40, no homes to call their own, soul destroying zero contract jobs and terrifying hospital waiting lists.

They will have no free movement in Europe and should they wish to start a small business trading with Europe they will suffer extra costs and red tape which will negate the whole point. The Tories have not been caretakers of the country's future on any level.

This is in contrast to the inherited wealth and privilege (George Osborne, Jacob Rees Mogg, David Cameron for example) that many of them enjoy, safe in the knowledge that their children and grandchildren will live life with impunity at the very top of society.

They should hang their heads in shame.

I couldn't agree more with you

Not a bottemless pit.

But I agree that some areas such as mental health and SEND should get more, maybe a lot more, funding.

All the supposed fiscal savings, all the very real suffering - which is still with us - why was it all for nothing? And just where has all the "necessary financial savings" gone?

Thanks a lot Cameron, Osborne, Clegg and the rest of the Coalition crew who deliberately and willfully foisted this horror story on us.

It seems to me that this horror story was foisted on us by a combination of adhering to a dominant economic dogma and to the ideology connected to that dogma of a belief in the ability of 'the market' to solve economic problems, the cult of 'individual choice' and a belief that state intervention not only crowded out private enterprise but also produced a dependency culture which made people unwilling or unable to work to 'better' themselves or solve their own economic problems. Is it any wonder that the grocer's daughter from Grantham, reared by a Methodist preacher, was deeply attracted to these ideas when Methodism taught that idleness was a moral failing, and that its work ethic was based based on two of Wesley's precepts; Gain all you can and Save all you can (but had sidelined his third; Give all you can. By which he was encouraging the distribution of wealth to the poor)

(Fascinating paper here on the evolution of the Methodist work ethic: www.academia.edu/774866/_Beruf_Calling_and_the_Methodist_work_ethichttps://www.academia.edu/774866/_Beruf_Calling_and_the_Methodist_work_ethic )

Basically these beliefs have informed tory thought since 1979.

And, of course, there was a deep distrust of 'socialism', with the truly terrible excesses of the USSR in the very recent past leading to a fear of the dangers of 'state control'.

So, encouraged by an economic theory based on the belief that markets were self regulating and beneficial, and that lifting the dead and wasteful hand of the state would free us all to become thrusting and successful entrepreneurs, made efficient by the effect of market competitiveness and providing better services and better growth in the economy the tories have been slashing away at public spending ever since.

I have often thought that much economic theory is based on wishful thinking rather than reality. Neo-classical theory, which is what dominates now, regards 'economic man' as a rational actor whereas we know that we can be far from rational. 'Economic man' doesn't always behave the way that theory says he will...

The theory behind austerity was not only based on neo-classical economic theory, but also on a misconception, or failure to understand, of how national finances work (it's neither a household, nor a business) or how money flows in the economy.

It was so obvious that radically cutting state spending would impair the economy because it would put public sector workers and public sector suppliers (who were all private sector businesses) out of work with no immediate alternatives open to them. And that simultaneously cutting welfare benefits to force people into non existent jobs would not only impoverish them, but also take much needed money out of the economy.

(good blog here about the economic effects of raising welfare payments: blogs.lse.ac.uk/covid19/2021/07/20/welfare-as-fiscal-policy-why-benefits-should-be-raised-not-lowered-during-recessions/)

I acquit the tories of deliberately inflicting the horrors of austerity on the UK. Dominant economic theory said they were correct, their ignorance of the mechanics of money flows around an economy and their ideological beliefs drove them.

Now we've seen the dire results perhaps we start making better political choices... (though I have to confess that Labour, that none of the political parties, offer much that is different)

Joseann thank you for clarifying.

No problems Doodledog. I always respect your articulate posts.
In discussions such as these, I think it is interesting to analyse mindsets and how different people react. You're right context gets lost as personal situations and opinions are often misinterpreted.

Joseann

The quote you decided to highlight Doodledog was NOT actually from me but another poster who said, it’s not helpful for those who have succeeded financially to say that they got where they are by sheer hard work, because it makes those who have less money feel that they have failed.

I didn't say the highlighted quote was from you, or (intentionally) imply that it was, and I'm sorry of you read it that way.

Joseann

PS sorry nightowl it wasn't specifically you in that quote at 8.08, but boasting and smug were mentioned somewhere more than once.

I used both words, although not in the context you suggest.

I said (as an aside) that luck influences a lot of how we do in life, and mentioned a good education as one of those things. It is surely undeniable that people on here boast about their excellent educations - even after 60 years or so, which is why I mentioned it. That is not the same as saying they boast about the money in the bank, though.

I also said that it comes across as smug when people say that austerity is somehow mitigated by the fact that there are more millionaires than there used to be. It does. Again, that is not the same as saying that anyone is smug about their wealth or anything else.

Words get twisted so often on here.