Brexit and the waning days of the United Kingdom

[Tamas]

I think my biggest gripe with the tax raise is that I'd prefer if it the money was acquired, instead of wages, from sources which have seen meteoric rise during the pandemic and before i.e. assets (therefore wealth).

In general (and yes, like every other person on the planet, my own situation influences my views), we are building (perhaps already built) a world where assets are the best source of income, and the gap between those with and without valuable assets like properties will continue to widen if things not change.

If that's the case, taxation should switch toward a wealth, rather than income based model. I am not sure of the extent this would be feasible but it could help keeping the future serf-like existence of the no-assets class more bearable and therefore postpone the guillotining of the with-assets class. 

[Richard Hakluyt]

As it stands now the tax rate effectively falls as one becomes wealthier; it looks like the current government is intent on making this discrepancy even worse.

[Sheilbh]

Yeah. I agree.

I also think there is no way that this tax will actually go towards social care on the current plan. The idea is that this money (£10billion) will be spent on the NHS for three years for it to catch-up/recover after covid and will then move to social care. But three years from now is an election year and even if it wasn't I just think there is no way a government is going to cut the NHS budget by £10billion. So this is going into the NHS and they will pay for social care (if at all) separately.

On tax I think there is a very strong argument for a windfall tax right now because - property isn't the main one, even if it's the most personal - there are asset classes that have increased in value hugely over the last 18 months because of emergency action taken by the central banks to stabilise the financial system. I think it is fair to say that gain (which was caused by emergency state measures) should be taxed for some of the one-off spending we will all probably face now - for example we should be spending the £15billion requested for education catch-up etc. But there will be all sorts of state functions that probably need a one off flood of cash to help with the backlog that's been caused by covid restrictions, lockdowns etc - courts need it, schools and universities (possibly through personal tutoring or something like that), public works etc.

More generally I think there's a need to move taxing wealth for the reasons you give. I don't know how to do that because think it will be technically difficult - the great benefit of income tax, national insurance and VAT is that I think the vast majority are relatively easy to collect. VAT is auto-collected so companies can claim it back, and PAYE works (the idea of tax returns for all like in the US fills me with horror ). Taxing wealth will be more difficult because the wealthy have the resources to avoid tax and to set up complex structures of companies and trusts that actually hold their assets, they can often move them around or at least move the tax registration around. I think it will take focus and a degree of international cooperation.

If we can get there on the OECD corporate tax minimum then I think a wealth tax may be next - that is a big "if" though. And in a way property is easiest because it is physically in a location (it's a bit like the financial sector which for regulatory reasons generally needs to be actually resident somewhere and, even when it isn't, have some form of establishment - which makes it easier to tax).

As it stands now the tax rate effectively falls as one becomes wealthier; it looks like the current government is intent on making this discrepancy even worse.

Although that's largely through the Universal Credit cut - an NI rise is still a little bit progressive. But it is on earned income (and not income from capital):


I think we are looking at a 1.25p rise now - so it does hit higher earners more. But this is wildly outweighed by the UC cut which will hit the poorest by £1,000:


Edit: And apparently NHS estimates are that £5billion would let them clear the backlogs by 2035; £13billion and they think they can clear the backlog by 2024-5.

Edit: Apparently government is a bit concerned by response on this being unfair - so considering raising the tax on dividend income too.

[Sheilbh]

So - this is not a social care plan. It is a plan for more funding or for changing how social care is funded but it's still not actually a plan of what the social care sector should look like

Paul Brand
@PaulBrandITV
BREAKING: I understand care plan is as follows...

1. Cap of £86k
2. Floor of £100k
3. 1.25% hike NI
4. Raises £36bn
5. BUT vast majority goes to NHS. Only £5.4bn for care.
6. Of that £5.4bn, £2.5bn funds care cap. Leaves £2.9bn over 3 years for reform. Care leaders furious.

Care sector was briefed on the plan this morning. They say there'll also be an extra £500m for workforce training but worry this will do nothing to raise wages, which they feel is the main factor behind the staffing crisis.

"Feeling depressed", one source tells me.
Bit more detail on £100k floor:

Not quite a floor as costs will be tapered between £20k-100k so individual still contributes but state helps.

But main reaction from care sector is about overall funding here - falls way short of what they feel they need and seems more about NHS.

[Richard Hakluyt]

They will drop the triple-lock on old age state pensions for one year too.

Something to displease everyone in today's announcements 

[Sheilbh]

They will drop the triple-lock on old age state pensions for one year too.

REJOICE!

It would have been ridiculous if because of furloughing and mass reduction of working hours being unwound we had to increase the state pension by about 10% :bleeding

Something to displease everyone in today's announcements 

I'm not convinced by a lot of this and I think there's issues with all of it (I'm expecting a lot of unthought through consequences to surface in the next few days/weeks - pasty tax style), but it is weird to see government (especially this government) doing something controversial, that will probably involve short-term political pain (like raising taxes and freezing pensions) for something they probably think and want to be a long-term policy gain.

It feels like it's been a very long time since a government's tried something like that - and, weirdly, because of that people might not actually be too annoyed

Edit: And it is worth pointing out that combined with the budget tax changes in total the government's announced tax rises of about 1.5% of GDP this year which is unexpected.

[Richard Hakluyt]

I take your point; it is one of the most serious actions I have seen this government take. I see the hand of Sunak?

[Sheilbh]

Maybe - I'm not sure on the internal politics. I think Sunak would definitely (and I'm with him on this) not want to increase the deficit for ongoing spending. I think we can and should embrace debt spending for things like energy transition or covid catch-up costs, but we shouldn't for things like funding social care which is only going to increase in the future.

I think the circumstances for a "health and social care levy" which is how this will be pitched are uniquely good. I think after the pandemic people will absolutely accept that the NHS and social care system needs more money.

But even that limited social care reform is a big step. David Cameron and Nick Clegg jointly commissioned. So this government is acting on a report by a commission that first made its proposals in 2011. Gordon Brown in 2010 had proposals on social care. I have issues with it, but they are grasping a nettle here that a lot of governments have dodged for the last twenty years despite everyone knowing the current system doesn't work and our population is ageing.

[Richard Hakluyt]

I'm hoping that the "health and social care levy" will be extended at some point to pension incomes. In general I am in favour of equalising tax rates between pensioners and workers while increasing the basic pension (which is still very low if it is one's sole income).

[Sheilbh]

I'm hoping that the "health and social care levy" will be extended at some point to pension incomes. In general I am in favour of equalising tax rates between pensioners and workers while increasing the basic pension (which is still very low if it is one's sole income).

Yeah - although one of the great achievements of the last 30-40 years has been a huge reduction in pensioner poverty:


Unfortunately that has been largely accompanied by a rise in child and working age poverty which are now higher than pensioner poverty:


It's very different from my memory of the 90s - not least because of the assortment of other age-related and means tested benefits pensioners can access. Again I think almost bigger than the tax rises are the universal credit cut which will hit households with 3.5 million children so drive up the child poverty numbers even further. I suppose this is sort of what you'd expect given that the elderly can (and do) vote.

Edit: And incredibly around 25% of working age people are contributing to defined benefit pension schemes (I'm assuming this must be public sector plus companies like Royal Mail) - it is crazy but the UK pension system with the mix of defined benefit and defined contribution plust state is internationally rated as one of the most sustainable. For all our talk of the growth in wealth earlier about 50% of the UK's aggregate wealth is held as pensions (I imagine both DB funds and DC funds).

[Syt]

 

https://www.theguardian.com/politics/2021/sep/07/government-ease-sewage-discharge-rules-amid-chemical-shortage

Sewage discharge rules eased over fears of chemical shortage

Wastewater plants in England and Wales offered waiver because of impact of lorry driver crisis

Sewage treatment chemicals have been added to the growing list of products in short supply because of the UK's chronic lorry driver shortage, it has emerged.

The government has told wastewater plants in England and Wales they may be able to discharge effluent that had not been fully treated because of disruption caused by "supply chain failure".

In a regulatory position statement issued on Tuesday, the Environment Agency introduced a waiver that would mean some companies would not have to go through the third stage in the treatment of sewage if they did not have the right chemicals.

The waiver relates to a feared shortage of availability of ferric sulphate, an acidic solution used to suppress the growth of algae, the Department for Environment, Food and Rural Affairs (Defra) said.

It said the temporary relaxation of the rules would last until the end of the year to allow "discharges from water treatment works that cannot comply with permit conditions because of an unavoidable shortages of chemicals to treat effluent".

A government spokesperson said the water supply to consumers would not be affected and any waste company that wished to avail of the waiver needed prior approval from Defra.

It also said that no water company had yet notified it of a shortage of ferric sulphate but it was introducing the regulatory position as a precautionary measure.

The chemicals industry is the latest in a series of sectors hit by the chronic shortage of lorry drivers caused by Brexit and the pandemic.

In recent weeks Nando's has been hit by shortages of chicken, McDonald's ran out of milkshakes and Ikea is struggling with supply of about 1,000 products including mattresses.

The Chemical Business Association said it had been warning Boris Johnson, transport secretary Grant Shapps and business secretary Kwasi Kwarteng since June this year about the potential disruption in the supply of critical chemicals for the water and agriculture industry.

A recent survey of its members showed that 93% were experiencing haulage shortages, up from 61% in the first quarter of the year.

One of its concerns is that the driver shortage will be worse in the chemical industry because of the requirement for additional qualifications for anyone carrying hazardous substances.

"We are seeing a real crunch on the driver front," said Tim Doggett, CEO of the CBA.

"My concern and what I have said to the Department for Transport this morning is the game of musical chairs we will see. If you have a driver faced with a job which means he doesn't have to get out of his cab to deal with dangerous substances and one that gets paid the same and has to handle hazards and be specially qualified to do so, you know which job the driver will go for," he added.

A government spokesperson said: "This action is strictly time-limited and there are robust conditions in place to mitigate risks to the environment.

"The most sensitive and high-risk watercourses will not be affected and any company planning to make use of this short-term measure must first agree its use with the Environment Agency, which will be checking compliance."

[Josquius]

With this tax rate increase stuff. Its interesting they're saying, with their media chums happily reporting along it's a 1.25% increase not a far worse 10% increase....

[Sheilbh]

Aren't tax rises and cuts always explained by the percentage point rise or fall, not by reference to how much the existing tax rate grows or shrinks?

Just thinking of Osborne's top  and corporate tax cuts and VAT rise and Brown always describing tax rises as an increase of x pence in the pound.

[Josquius]

Aren't tax rises and cuts always explained by the percentage point rise or fall, not by reference to how much the existing tax rate grows or shrinks?

Just thinking of Osborne's top  and corporate tax cuts and VAT rise and Brown always describing tax rises as an increase of x pence in the pound.

It would make sense, as dishonest as it is it makes it sound more palatable.
Still stinks even if its a universal stinkage.

[Richard Hakluyt]

Employers also have to pay 1.25%. I think of it as a 2.5% additional tax on employing people.