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Budget 2012


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#1 Icewolf

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Posted 21 March 2012 - 10:32 AM

http://www.bbc.co.uk...litics-17449501 <-At a glance report

http://www.bbc.co.uk...litics-17463747 <-BBC political analysis

http://www.bbc.co.uk...siness-17372581 <-Collective page for budget stories.


So its Budget day in the UK, with the government unveiling its taxation and spending plans for the next year.

My first reaction is that there are a lot of tax cuts here. Of particular impact to most people is that the income you can earn before paying tax has been risen to 9205-above and beyond the rate that was originally planned to be in place (moving towards a target of 10 000 by 2015).

The biggest political impact will be the cut from 50 to 45% for the top tax rate. If the report is right and this really was only raising 100 million a year this is probably the right economic decision, although given the riots last summer and the general discontentment in the UK, I wonder how much the other non-financial negatives have been considered. Although I suppose a political calculation is that no-one will remember this in 2015, but they will remember if they still don't have a job, so this is a gamble that it will boost the economy and therefore employment.

Any other thoughts?

#2 Hiro Nakara

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Posted 21 March 2012 - 10:49 AM

37p on a pack of fags, all I can say to that is HAHAHAHA, sucks to be a smoker.

#3 Mayzie

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Posted 21 March 2012 - 10:56 AM

37p on a pack of fags, all I can say to that is HAHAHAHA, sucks to be a smoker.


<_<

Happens every budget, it's not going to stop anyone smoking. Besides, we're all 138.60 a year better off come next month because of the planned personal income tax allowance increase for 2012-13 and I don't smoke 374 packets of cigarettes a year so I'm not bothered really.

You can either afford to smoke or you can't, when I've got no money, I don't buy any fags, simple as that really.

#4 Hiro Nakara

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Posted 21 March 2012 - 10:59 AM

<_<

Happens every budget, it's not going to stop anyone smoking. Besides, we're all 138.60 a year better off come next month because of the planned personal income tax allowance increase for 2012-13 and I don't smoke 374 packets of cigarettes a year so I'm not bothered really.

You can either afford to smoke or you can't, when I've got no money, I don't buy any fags, simple as that really.


It's a great way to throw away 2000 per year.

#5 KainIIIC

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Posted 21 March 2012 - 11:54 AM

The budget being fiscally neutral is better than cutting back even further. It still probably isn't enough for anything but a recovery on life support. Maybe the offsetting tax cuts and tax hikes will be better for demand, but marginally at best. Cameron's austerity policies have basically failed, exactly as it was foretold, since the "confidence fairy" is indeed imaginary, and contractionary policies are contractionary.

#6 the rebel

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Posted 21 March 2012 - 12:55 PM

Cameron's austerity policies have basically failed, exactly as it was foretold.


Labour didn't really have any new ideas and were going to be basically the same if not worse, than what the coalition is doing. They can slag of the ruling government all they want but without any ideas with how they would do things different, falls on the deaf ears of the public.

Edited by the rebel, 21 March 2012 - 12:55 PM.


#7 Stewie

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Posted 21 March 2012 - 01:18 PM

The budget being fiscally neutral is better than cutting back even further. It still probably isn't enough for anything but a recovery on life support. Maybe the offsetting tax cuts and tax hikes will be better for demand, but marginally at best. Cameron's austerity policies have basically failed, exactly as it was foretold, since the "confidence fairy" is indeed imaginary, and contractionary policies are contractionary.



The austerity plans have allowed more industrial funding for construction and research. This is needed as we need to increase our manufacturing industries. More and more companies who exported their manufacturing are bringing their production back to the uk due to fuel costs and because people in china/ India want more money because they are having a social revolution and are becoming more greedy.

This will mean that over the next 5 years the uk will get a renaissance of our industrial presence and will allow us to invest taxes currently being made back into education, healthcare, tax cuts by the elections in 2015.

#8 Icewolf

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Posted 21 March 2012 - 01:30 PM

Without the cuts in the budget the government ran the risk of losing its AAA rating (and even with the cuts has that risk), which means that their bond yields get pushed up, which means that general interest rates in the economy rise. Which makes borrowing more expensive, and increases the cost of governing, meaning that the money kept in by government spending gets sucked out the other way.

With a deficit of 12% of GDP there are no good options.

#9 Stewie

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Posted 21 March 2012 - 01:34 PM

We tried to become a services country over the past 20 years under successive Tory and Labour governments and the left can shout as much as they can but they allowed the banks to remain unregulated for 13 years and spent beyond their means. It's a tough medicine but it is one we have to swallow to allow our industries to rejig and redevelop allowing our manufacturing industries to come alive again.

#10 Zoot Zoot

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Posted 21 March 2012 - 01:34 PM

Meh, it could be worse, we could have the American deficit.

#11 Dennis Von Bremen

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Posted 21 March 2012 - 02:03 PM

The austerity plans have allowed more industrial funding for construction and research. This is needed as we need to increase our manufacturing industries. More and more companies who exported their manufacturing are bringing their production back to the uk due to fuel costs and because people in china/ India want more money because they are having a social revolution and are becoming more greedy.

This will mean that over the next 5 years the uk will get a renaissance of our industrial presence and will allow us to invest taxes currently being made back into education, healthcare, tax cuts by the elections in 2015.

Exactly, this idea that austerity failed is just total nonsense. Austerity works but it can take a while for the markets to recover after such a drastic recession. Just keep up with austerity and keep on cutting taxes and spending and I guarantee an economic boom in the future. If anything, the austerity hasn't been enough. You guys need to make much bigger cuts. 45% tax rate? I find 10% tax rates to be excessive!

#12 KainIIIC

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Posted 21 March 2012 - 02:10 PM

Labour didn't really have any new ideas and were going to be basically the same if not worse, than what the coalition is doing. They can slag of the ruling government all they want but without any ideas with how they would do things different, falls on the deaf ears of the public.


Labour's idea was to keep their modest fiscal stimulus intact and allow the economy to recover before implementing cuts. Tory-Libdems was "let's all go back into recession once again and see how that turns out!". Obviously, Labour should have implemented a bigger investment plan to increase exports, but they decided to rely on devaluing the pound instead.

The austerity plans have allowed more industrial funding for construction and research. This is needed as we need to increase our manufacturing industries. More and more companies who exported their manufacturing are bringing their production back to the uk due to fuel costs and because people in china/ India want more money because they are having a social revolution and are becoming more greedy.

This will mean that over the next 5 years the uk will get a renaissance of our industrial presence and will allow us to invest taxes currently being made back into education, healthcare, tax cuts by the elections in 2015.

We tried to become a services country over the past 20 years under successive Tory and Labour governments and the left can shout as much as they can but they allowed the banks to remain unregulated for 13 years and spent beyond their means. It's a tough medicine but it is one we have to swallow to allow our industries to rejig and redevelop allowing our manufacturing industries to come alive again.


The austerity doesn't "allow" for more industrial funding. Britain has its own autonomous, free-floating currency, and they could have spent that money in investment without cutting the economy back into recession. You're correct that it was a foolish idea to rely heavily on Financial services, and that's something that Labour and Tories share blame in. Once again, any uptick in exports, and any down-tick in the trade deficit has more to do with the lower dollar policy pursued since late 2008, and a drop in domestic consumption demand (as happened in 2008-09).

Without the cuts in the budget the government ran the risk of losing its AAA rating (and even with the cuts has that risk), which means that their bond yields get pushed up, which means that general interest rates in the economy rise. Which makes borrowing more expensive, and increases the cost of governing, meaning that the money kept in by government spending gets sucked out the other way.

With a deficit of 12% of GDP there are no good options.


The UK has its own central bank and free-floating currency. The Bank of England essentially sets interest rates however they want to, as the Federal Reserve does in the United States, as the BoJ does in Japan. Britain is not like the Eurozone that requires them to seek funding from the market - that is why the UK has run such high deficits and yet has had plunging interest rates, not because of austerity. Look at how badly Japan getting downgraded to the level of Botswana did to their borrowing costs - nothing, they plunged down to 1% for the 10-year bond.

Meh, it could be worse, we could have the American deficit.


The American deficit is actually shrinking with more pro-growth policies, and by next year (if not this year) will be less than the British deficit, as a % of GDP.

#13 KainIIIC

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Posted 21 March 2012 - 02:25 PM

Exactly, this idea that austerity failed is just total nonsense. Austerity works but it can take a while for the markets to recover after such a drastic recession. Just keep up with austerity and keep on cutting taxes and spending and I guarantee an economic boom in the future. If anything, the austerity hasn't been enough. You guys need to make much bigger cuts. 45% tax rate? I find 10% tax rates to be excessive!


If your goal is to grow the economy and improve your standard of living (which yours obviously is not - your goal is to get rid of government), then austerity is like bleeding the patient with leeches. It's supposed to work according to ignorant doctors, but always ends up making the patient worse. On the few occasions it works, it's hailed as a success. Heck, the Austerians tried to dub Ireland and Latvia as "success" stories, even though they're smoldering inside a deep depression.

#14 Icewolf

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Posted 21 March 2012 - 02:46 PM

Exactly, this idea that austerity failed is just total nonsense. Austerity works but it can take a while for the markets to recover after such a drastic recession. Just keep up with austerity and keep on cutting taxes and spending and I guarantee an economic boom in the future. If anything, the austerity hasn't been enough. You guys need to make much bigger cuts. 45% tax rate? I find 10% tax rates to be excessive!

You cannot cut too quickly though. Even you have to admit that too rapid a change to the demand structure of an economy can only be a bad thing. Hell, its what caused this recession (and all recessions) in the first place.


Labour's idea was to keep their modest fiscal stimulus intact and allow the economy to recover before implementing cuts. Tory-Libdems was "let's all go back into recession once again and see how that turns out!". Obviously, Labour should have implemented a bigger investment plan to increase exports, but they decided to rely on devaluing the pound instead.

Fiscal stimulus? Cutting VAT to 15% and then doing....um...not much else is hardly a fiscal stimulous. Neither is just funding the public sector to a greater and greater % of economy.

The austerity doesn't "allow" for more industrial funding. Britain has its own autonomous, free-floating currency, and they could have spent that money in investment without cutting the economy back into recession. You're correct that it was a foolish idea to rely heavily on Financial services, and that's something that Labour and Tories share blame in. Once again, any uptick in exports, and any down-tick in the trade deficit has more to do with the lower dollar policy pursued since late 2008, and a drop in domestic consumption demand (as happened in 2008-09).


The UK has its own central bank and free-floating currency. The Bank of England essentially sets interest rates however they want to, as the Federal Reserve does in the United States, as the BoJ does in Japan. Britain is not like the Eurozone that requires them to seek funding from the market - that is why the UK has run such high deficits and yet has had plunging interest rates, not because of austerity. Look at how badly Japan getting downgraded to the level of Botswana did to their borrowing costs - nothing, they plunged down to 1% for the 10-year bond.

Inflation is not a good idea. Britain needs money from Asia and the Middle East. Do you think Barclays could have bailed itself out with foreign capital if they had demanded higher rates to offset inflation?

The only benefit of inflation is in a recession when it drives prices wages (the stickiest of prices) back to where they should be. However, when you need investment to get out of a recession, it is a killer.

And the Eurozone does print money and has been doing so for some time now. All those ECB bond purchases...hasn't got spain and Greece out of the woods yet.



The American deficit is actually shrinking with more pro-growth policies, and by next year (if not this year) will be less than the British deficit, as a % of GDP.

http://en.wikipedia.org/wiki/List_of_countries_by_future_gross_government_debt

IMF figures for 6 months ago. Most recent I could find. Show US debt rising continuously (ergo, a deficit) with British debt starting to fall as a share of GDP in 2014.

#15 KainIIIC

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Posted 21 March 2012 - 03:05 PM

Fiscal stimulus? Cutting VAT to 15% and then doing....um...not much else is hardly a fiscal stimulous. Neither is just funding the public sector to a greater and greater % of economy.


As I said, a modest fiscal stimulus, smaller than most of its neighbors (although larger than Ireland and France). The plan seemed to be to increase output by devaluing its pound while offsetting the rise in imported inflation with a lower VAT, also done to help spur domestic consumption. Hate it or like it, increasing the public sector is fiscal stimulus and does increase output and consumption.

Inflation is not a good idea. Britain needs money from Asia and the Middle East. Do you think Barclays could have bailed itself out with foreign capital if they had demanded higher rates to offset inflation?

The only benefit of inflation is in a recession when it drives prices wages (the stickiest of prices) back to where they should be. However, when you need investment to get out of a recession, it is a killer.


That's why Gordo reduced the VAT to offset the incoming inflation. The UK isn't like the US, and cannot supply its population all of the consumer and commodity goods its economy needs, thus the UK experienced higher inflation when it devalued its pound. That's why you need to invest in the economy and in exports to offset what needs to be imported. Public investment also increases demand, which allows for the private sector to take over once they are deleveraged.

And the Eurozone does print money and has been doing so for some time now. All those ECB bond purchases...hasn't got spain and Greece out of the woods yet.


The ECB only prints deficits up to 3% of GDP, the fact that it doesn't do more is why there is now a sovereign debt crisis in Europe. Given Spain's massive drop in consumption and massive increase in savings, they needed a BIGGER deficit to get themselves out the woods. Instead they're just shooting themselves in the foot day after day with austerity, with no light at the end of the tunnel. This sovereign debt crisis would be over the minute the ECB decided to officially backstop its member-state's debts with its printing press. The Germans don't want this, and they effectively control the ECB.

http://en.wikipedia.org/wiki/List_of_countries_by_future_gross_government_debt

IMF figures for 6 months ago. Most recent I could find. Show US debt rising continuously (ergo, a deficit) with British debt starting to fall as a share of GDP in 2014.


That's contingent on a growing British economy, which isn't happening. This slump will be longer and worse than they faced in the Great Depression as a result:

Posted Image

speaking of the IMF, they actually warned that austerity harms growth and will cause Europe to go back into recession. Yes, the IMF, who was the king of shoving austerity down the throats of developing nations during the 80s and 90s, warns against austerity.

Edited by KainIIIC, 21 March 2012 - 03:23 PM.


#16 Icewolf

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Posted 21 March 2012 - 04:47 PM

Firstly, can I ask, wtf with that graph? Shifting the current crises along the x axis so the peak comes later in order to make the recession look longer is just dodgy/dishonest. And even allowing for that, it shows us at a better stage of recovery now than in the 1930s. So again, wtf with the graph?

Secondly, the IMF saying that hardly invalidates their projections. Surely the fact that they are saying stuff you agree with should make you agree with their projections even more.

The reason there is a sovereign debt crises is because people don't believe that governments can pay their debts. If you try and inflate your country out of it, that is just austerity by another measure. Living standards also fall in that case as well, as people will stop lending at low rates, so government expenditure will fall in real terms, just not in cash terms.

Also, if you are pro inflation, why are you pro inflation reducing measures such as VAT cuts?

#17 The Disco Commandant

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Posted 21 March 2012 - 04:58 PM

I can only wish we Americans had a deficit as small as the UK, but our government would never allow our taxes to rise high enough for it.
I admit, I'm a bit jealous

#18 commander thrawn

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Posted 21 March 2012 - 05:20 PM

I can only wish we Americans had a deficit as small as the UK, but our government would never allow our taxes to rise high enough for it.
I admit, I'm a bit jealous



You really want a VAT? That is what taxing our way out of it would entail. I for one don't favor regressive taxation.

#19 Icewolf

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Posted 21 March 2012 - 05:26 PM

You really want a VAT? That is what taxing our way out of it would entail. I for one don't favor regressive taxation.

VAT is not automatically regressive. For example, the Netherlands has a 6% basic rate VAT and a 19% luxury rate. And its significantly less regressive than the state lotteries that local governments love so much in the US.(sorry, writing a paper on gambling regulation at the moment so that is fresh in my mind).

And you don't need a VAT. Just a tax rate that matches expenditure. Or in the US case, a tax rate to match a lower spending amount as you can't just tax or just cut your way out of a hole that size.

#20 Lord GVChamp

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Posted 21 March 2012 - 05:32 PM

You really want a VAT? That is what taxing our way out of it would entail. I for one don't favor regressive taxation.

Guys, let's not make this about the US! I am honestly interested in some of the choices facing the British government.




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