The Lemon Fool

I have just looked at a summary of the Autumn Statement, and I have to say it seems under-whelming, and the economic forecasts are truly awful.

Inflation is forecast to stay higher for longer, and growth over the next 5 years looks pathetic. What growth we have had recently seems to be due to immigration which is now ever higher. Today's net migration number for 2022 is staggering!

The National Insurance cuts were good, as were the business investment measures. But, there was very little on what is really needed to generate growth - Skills, infrastructure, green energy, regional investment, joining the EU single market etc.

Household disposable income is set for the largest drop since WW2 due to fiscal drag, which is going to continue for another few years yet. You can't get much growth if you keep increasing taxes.

The self-imposed fiscal rules are a joke. Reducing debt as a fraction of GDP in 5 years time by some unrealistic spending cuts after the next election is a fantasy. This rule is unnecessary and damaging.

Lack of ideas, no coherent industrial strategy - we are a country in decline and I cannot see a political party that can get us out of it.

Contrast with the IRA in the USA which has triggered decent growth.

FD

Our household will welcome the NIC reduction, but I never expected anything earth shattering. We have a budget and an autumn statement every year - nothing major ever comes out of them. I mean, how can it? you can't redefine tax policy every 6 months.

Probably another budget before the election, where I think we'll see some further concessions made to households - but like I said, nothing earth shattering.

vand wrote:like I said, nothing earth shattering.

Truss tried to shatter the earth, tax-wise, and people panicked. So now politicians are terrified of doing anything bold and imaginative, and all we get is tinkering. Starmer will be the same. Managed decline. Just don't frighten the horses.

vand wrote: you can't redefine tax policy every 6 months.

Up here in Scotland our tax bands were frozen in 2018 and my marginal tax rate has also been 42% since then. These are very insidious, harmful tax mechanisms and negate wage or, in my case, pension increases.

The really worrying thing is that when a government, of whichever party, gets a taste of this insidious tax mechanism, they can get addicted to it. This IS effectively a method of continual, harmful and real time tax policy change, it is just invisible to most tax payers. It will take in an additional £40 billion, by stealth.

scotview wrote:

vand wrote: you can't redefine tax policy every 6 months.

Up here in Scotland our tax bands were frozen in 2018 and my marginal tax rate has been 42% since then. These are very insidious, harmful tax mechanisms and negate wage or, in my case, pension increases.

The really worrying thing is that when a government, of whichever party, gets a taste of this insidious tax mechanism, they can get addicted to it. This IS effectively a method of continual, harmful and real time tax policy change, it is just invisible to most tax payers.

Yes, the so-called "fiscal drag" thing, which is much more potent when inflation is up, which is why it is such a snide way to increase taxes.

But wasn't Gordon Brown the master of "stealth" tax increases? Of course he is Scottish . .

Lootman wrote:Truss tried to shatter the earth, tax-wise, and people panicked. So now politicians are terrified of doing anything bold and imaginative, and all we get is tinkering. Starmer will be the same. Managed decline. Just don't frighten the horses.

Yes. Any politician nowadays who displeases the Office of Budget Responsibility gets singled out PDQ as the nail which sticks out and is to be hammered down at all costs (as Liz Truss discovered).

The OBR's pronouncements and approval have been given the status of holy writ by the Treasury, most of the media, the political class, quangos and a huge number of rent-a-quote academics who if they were to be called third rate would be vastly overstating their competence. Never mind that the OBR's economic model is highly flawed, or that its forecasting ability makes astrologers seem like Laplace's Demon. Thou shalt comply with the OBR's diktat or be cast out as a heretic.

The OBR's malign influence ensures that the British economy follows the low growth, high regulation, excessively micromanaged economic model favoured by Gordon Brown (the father of the OBR).

Enjoy the decline. At least we can still invest overseas and diversify away from the stagnating UK.

scotview wrote:

vand wrote: you can't redefine tax policy every 6 months.

Up here in Scotland our tax bands were frozen in 2018 and my marginal tax rate has also been 42% since then. These are very insidious, harmful tax mechanisms and negate wage or, in my case, pension increases.

The really worrying thing is that when a government, of whichever party, gets a taste of this insidious tax mechanism, they can get addicted to it. This IS effectively a method of continual, harmful and real time tax policy change, it is just invisible to most tax payers. It will take in an additional £40 billion, by stealth.

I agree, fiscal drag was popularized during Gordon Brown's time in no11 and I have no doubt has been used down the ages as a way to confiscate more wealth over time. It's just as bad as raising the headline rate but setting it at a higher threshold.

It looks to me like the fiscal drag isn't working if the intention is to balance the books. And if we can't get into a surplus and start to reduce the public debt then sooner or later there'll need to be major spending cuts. Though I guess we're already there at local government level.

MuddyBoots wrote:It looks to me like the fiscal drag isn't working if the intention is to balance the books. And if we can't get into a surplus and start to reduce the public debt then sooner or later there'll need to be major spending cuts. Though I guess we're already there at local government level.

Politicians like to spend like drunken sailors. Even the Tory ones who should know better. Yesterday Hunt had an opportunity to raise welfare benefits by less than inflation, or even freeze them. Apparently he thought about doing that, and then lost his spine. No party is serious about reducing spending.

Sometimes I think it will take a crisis to change this. It happened a bit in the 1970s when Labour had to beg money from the IMF. But these days a crisis just means spraying even more money at things (Banking crisis, Covid etc.)

So we need to starve the beast. But how? California voters did it via the famous 1978 Prop 13 revolution, forcing politicians to go to the voters for any new tax or tax increase. But of course we are not given that power here. Maggie, we need you again.

Lootman wrote:

scotview wrote:Up here in Scotland our tax bands were frozen in 2018 and my marginal tax rate has been 42% since then. These are very insidious, harmful tax mechanisms and negate wage or, in my case, pension increases.
The really worrying thing is that when a government, of whichever party, gets a taste of this insidious tax mechanism, they can get addicted to it. This IS effectively a method of continual, harmful and real time tax policy change, it is just invisible to most tax payers.

Yes, the so-called "fiscal drag" thing, which is much more potent when inflation is up, which is why it is such a snide way to increase taxes.

So there is little incentive for the Govt to reduce inflation much more.
It conveniently erodes our national debt and increases the tax take. Inflation around 4% is quite comfy in govt terms.
They can give us back odd dribs and drabs of our money whilst continuing to steal it wholesale.
Father Christmas meets Apollo Robbins

Just watch the 'independent' BoE ensuring a loooong glide path.

V8

Lootman wrote: So we need to starve the beast. But how? California voters did it via the famous 1978 Prop 13 revolution, forcing politicians to go to the voters for any new tax or tax increase. But of course we are not given that power here. Maggie, we need you again.

You mean more referendums? Now you're talking my language!

MuddyBoots wrote:

Lootman wrote: So we need to starve the beast. But how? California voters did it via the famous 1978 Prop 13 revolution, forcing politicians to go to the voters for any new tax or tax increase. But of course we are not given that power here. Maggie, we need you again.

You mean more referendums? Now you're talking my language!

Yep, California holds a referendum (more accurately, a voter proposition or initiative) on most kinds of local tax increases including bond measures and property tax increases. To win they need 50% plus 1 for a general revenue bond, and 2/3rds for a tax for a specific purpose. Some pass and some do not.

Otherwise a tax like property tax can only go up by 2% a year.

Prop 13 is still wildly popular after 45 years. Politicians hate it of course, which is how and why we know it is working well.

funduffer wrote:I have just looked at a summary of the Autumn Statement, and I have to say it seems under-whelming, and the economic forecasts are truly awful.

Inflation is forecast to stay higher for longer, and growth over the next 5 years looks pathetic. What growth we have had recently seems to be due to immigration which is now ever higher. Today's net migration number for 2022 is staggering!

The National Insurance cuts were good, as were the business investment measures. But, there was very little on what is really needed to generate growth - Skills, infrastructure, green energy, regional investment, joining the EU single market etc.

Household disposable income is set for the largest drop since WW2 due to fiscal drag, which is going to continue for another few years yet. You can't get much growth if you keep increasing taxes.

The self-imposed fiscal rules are a joke. Reducing debt as a fraction of GDP in 5 years time by some unrealistic spending cuts after the next election is a fantasy. This rule is unnecessary and damaging.

Lack of ideas, no coherent industrial strategy - we are a country in decline and I cannot see a political party that can get us out of it.

Contrast with the IRA in the USA which has triggered decent growth.

FD

Joining the EU single market! I'm not sure they will let us, well not without paying a (too) high price or going against the voters wishes. Maybe Putin will invade and make us I suppose.

I'm not sure the IRA did much growth either or maybe blowing up buildings is classed as recycling therefore generating growth.

I think the BoE has played a big part of being wrong or too slow and hasn't helped even fighting poor Lizzy.

Still we get the governments we vote for not the ones we need.

Gerry557 wrote:[

Joining the EU single market! I'm not sure they will let us, well not without paying a (too) high price or going against the voters wishes. Maybe Putin will invade and make us I suppose.

I'm not sure the IRA did much growth either or maybe blowing up buildings is classed as recycling therefore generating growth.

I think the BoE has played a big part of being wrong or too slow and hasn't helped even fighting poor Lizzy.

Still we get the governments we vote for not the ones we need.

Current GDP growth rates (Sep 2023):

USA 4.9%

UK 0%

https://tradingeconomics.com/country-li ... rowth-rate

I think Biden has done a decent job.

FD

Gerry557 wrote:

funduffer wrote:...
Contrast with the IRA in the USA which has triggered decent growth.

...
I'm not sure the IRA did much growth either or maybe blowing up buildings is classed as recycling therefore generating growth.

Presumably not Irish Republican Army, but rather Individual retirement account?

JohnB wrote:https://en.wikipedia.org/wiki/Inflation_Reduction_Act

Ah! Thanks.

funduffer wrote:
USA 4.9%

UK

I think Biden has done a decent job.

FD

The paradox is that GDP includes government spending which in Biden's case includes the IRA spend which in turn makes the USA debt clock tick up even quicker which means future generations will foot an ever growing bill.......$50 trillion by 2060.......ponzi.

MuddyBoots wrote:

Lootman wrote: So we need to starve the beast. But how? California voters did it via the famous 1978 Prop 13 revolution, forcing politicians to go to the voters for any new tax or tax increase. But of course we are not given that power here. Maggie, we need you again.

You mean more referendums? Now you're talking my language!

or is it 'referenda'

Anyway the political class has learned its lesson. Don't ask the electorate if there is any chance they might not give the 'correct' reply.
There won't be any more referenda for a loooong time!

scrumpyjack wrote:or is it 'referenda'

I didn't have the benefit of a classical education but I was corrected so like to pass it on.

Referendums is logically preferable as a plural form meaning 'ballots on one issue' (as a Latin gerund, referendum has no plural). The Latin plural gerundive 'referenda', meaning 'things to be referred', necessarily connotes a plurality of issues