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I have good new for you, Stephanie.

You'll never make a good politician.

You just shouldn't open a blog by saying you made a mistake, however trivial.

At least you didn't say "sorry" !

Hi Stephanie

Actually a lot of your logic and the IFS's points still hold true. When did the lessons of the laffer curve get forgotten?

For example if you earn over £150,000 and want to pay into a pension you either do salary sacrifice or set up a limited company and let it pay in. Hey presto the job is done! Tax and national insurance are never due

It is more difficult for the self-employed but at that level of earnings many will switch to a limited company structure anyway.

I was amused by the Chancellor's point that much of pension tax relief goes on higher earners. You see Labour changed the rules in 2006 under the "A" day changes which allowed this i.e higher contributions. So Labour are in effect reversing another policy move. It seems to have slipped their mind to publicise this.

Stephanie

Good that you do not need to be a "good politician", I guess.

All budget figures are and will be hot air once the negative growth hits -6%, -8%, -12% and more - which is very likely to happen as the origin of this crisis is not dealt with properly. We have a finance, a credit crunch and that left unsolved will just lead us deeper and deeper into depression.
Christian A. Wittke

When concentrating on the issue that impacts on the few you perhaps should declare whether you are in that earnings bracket. People on more modest salaries in this country will be pleased at the efforts to help younger people get jobs, be pleased that housing issues are being tackled, that there will still be investment in health and that among many other positive things in the budget the government is taking action on energy security through promotion of carbon capture.

A very "interesting" budget. I think i'm about £200 better off!! For those struggling with how to deal with that upper tax rate rise, and not being able to find pensions or anywhere else to creatively hide it, there seems to me to be a huge opportunity in buying up all those over 10 year old cars for a song, selling them to all those young people fortunate to be in employment (or have funds available to them from Ma an' Pa) and buying their first new and eco-friendly Citroen C1's....

The young whippersnappers can benefit in the knowledge they'll have minimal road tax to pay, and get the balance of whatever the savvy 50% income tax bracket "Arthur Daley" can flog on his 10 year old banger to them for, against the £2k that is being offered for scrappage allowance - marvellous.....Sounds like a business idea..... Anyone got any old bangers they want to get rid of for nothing ;o) ?

THE GREAT ANARCHISTIC MONEY PUMP

So, with all this debt and imminent cuts in Public Expenditure, there's even more scope for anarchistic anti-statism and PPP/PFI?

Whichever way one looks at it (or so it seems to me), the public get to fund New Labour's/New Conservatives's/Liberal-Democrats' sponsors', now that the banks have been recapitalised. Who will the banks be lending their new (pubic) money to if not those who are eager to invest in PFI projects? I repeat, whose money will they be borrowing to do that and thus further sell off the 'state silver'.....;-)

Corrections welcome.

Speaking from experience, high earners will find other ways to squirrel away their money. One of the main reasons they are high earners is because they know how to handle money and move it around to avoid such tax hikes. This will achieve very little in the long run: I bet its place on this budget is less to do with fiscal policy, more with political to-and-fro between the main parties.

The headline of "Taxing High-Earners" simply allows the government to tax the mass market at a higher level. The mass market is where the real money is.

When we ordinary folk say "how come we're having to pay more tax?", the government replies: "we're taxing high-earners more highly than you..."

Those on over GBP150k in 2007 will not be earning that sort of money this year, as "there's a recession on you know".

Meanwhile, the real rich are not domiciled in the UK and so their marginal rate of tax is low. They can relax on their motor yachts and on their private beaches/islands just like they've always done.

The 50% tax rate is a side-show designed to distract attention from the important issues around the budget. As you say, most of the improvement in public finances will come from cuts in public spending. Just three points to make about that:

1. This amounts to an admission by the government that their high-spending of the last decade was in fact unsustainable since it was funded by borrowing, mostly from abroad.

2. If the Chancellor has got his heroically optimistic figures about the recovery at the end of 2009 even slightly wrong, then the measures in this budget will not be nearly enough, and much bigger cuts will be needed.

3. Whatever happened to the goveernment's much-vaunted "fiscal stimulus" and "automatic stabilisers"? Have they really finally realised that this was all nonsense?

Beyond that, the Chancellor was still predicting a £175 billion deficit!!! Astonishing that a budget proposing to borrow so much should be portrayed as a stingy one. This budget is the last hurrah from a failed and discredited government that has all but destroyed our country's finances.

So the Treasury got back to you as well, did they? Or did Nick tell you what "line" to take?

When are we going to stop calling the public expenditure "investment"?

People have focused on those earning over 150K. But anyone earning over 100K is also badly affected, since they will lose some or all (if they earn over 113 K) of their personal tax allowance. Coupled with higher NI and loss of pension tax relief they stand to lose at least 3000 pa.

For those people who work as self-employed consultants on a day-rate the budget is a massive disincentive to work full-time. For every pound they earn over 100K up to 113K they will pay 60% in PAYE plus lose another 21% or so in employers/employees NI. If they put what remains in a SIPP they will lose another 20% when the fund pays out if they are a higher rate tax payer. So for every 1000 you earn you may end up only getting to spend 152 quid in their retirement - and even that will incur VAT.

For myself I would rather work less days per week to ensure that I stay below the 100K threshold. Hence not only is government revenue reduced but the country also loses the productivity of my labour.

For more Budget commentary, you are invited to read: "A horror budget" at gregpytel.blogspot.com

To what extent do projections take into account that the wealthy leave when top marginal rates go up? This threat is less credible than it was, since everyone knows Obama is going to raise the US top rate, and tax havens are being brought to heel.

Hmmmm...

Isn't a rather more obvious way of 'avoiding tax' [well obvious to a lazy person like me...] is that once one has earned £ 100 k or £ 150 k or other 'target' figure, that one just takes the rest of the year off ??

Tricky to do in some occupations, but one has to propose that in the new 'super-tax' world, the wealthy might belatedly discover 'quality of life' and that 'leisure time is the new Aston Martin'..

It does not matter what marginal rate of tax is applied to the rich they will always lobby to get it removed or reduced. What happened to the sharing of the pain? How many of the well healed are responsible for the crisis and how many have benefited from the exceptionally high income increases over the last ten years including some in the public sector. So what if some jump ship - it wont be the doctors and nurses, teachers, engineers, scientists and designers who create real wealth. Good riddance to the financial innovators and their overheads of directors and advisers.

"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."
by Simon Johnson

The Quiet Coup

Stephanie

Can you confirm (or not) that this budget "gave away" £5bn, at least for 2009/10.

If so, is it not a typical pre-election budget - spend now pay later?

6. At 10:02am on 23 Apr 2009, JadedJean wrote:
Who will the banks be lending their new (pubic) money to ....
Corrections welcome.
========================
Ok - it's public, not pubic. Good to see that you're not talking a load of Ed Balls about IQ for a change.

We are in the fine print stage, Stephanie.

I had a bit of fun last night asking my better half to read the European Commission's latest missive on anti-dumping duty on Norwegian farmed salmon. She has always wanted to know what I did between 0830 and 1830 hours Monday to Friday. It ain't fishing may I add.

I think Message 9 Adam_C-UK has got it about right. The levies on the wealthy are a side show; a political game to please the party faithful. it is also a softening up of public opinion for more income tax rises in the future once the situation has deteriorated further.

The most captivating thing about this budget is the serial dishonesty. The country is to borrow GBP 175 billion this year as a consequence of the previous deficit of GBP 38 billion escaping from control due to the recession. It is the product of a major policy miscalucation. This has little to do with the money used to underwrite the banks on which there are more opinions than there are Trotskyite parties.

One would have thought that such a hole in the public funds would elicit something a bit more dramatic than what has been presented.

Vince Cable, once again, seems to be the only poliitician speaking with a straight tongue. What we need to see are major cuts in government spending and use that as a strategic opportunity to refocus public spending on what we deem is needed in the future. Then we can use that to drive taxation policy.

That government spending is way, way too high is a given and it has to come down by about GBP175 billion in the middle of a recession.

One shouldn't laugh, but this government is quite ridiculous in creating this problem, then sitting on its hands after admitting it whilst at the same time accusing everyone else of being do-nothings. This is the methodology of a twelve year old!

Stodoc (#11) "When are we going to stop calling the public expenditure "investment"

At about the same time that people finally work out that if most of the GDP growth over '16 consecutive quarters of continuous growth averaging 2.5% a year' was down to the Financial/Business Services Sector as we were told by this government, and that's now had to stop doing much of what it was doing as it was basically a bubble premised on securitizing liars loans etc recovery can't possiobly be arond the corner or even a few years away, unless someone comes up with yet another bubble or means of raising GDP.

In the mean time, if we let them, they'll do what the Dollies and Dorothies of this world do best, tell dramatic Hollywood tales.

More people needs to tell the wizards (along with Brown, Cameron and Clegg ;-) that the jig is up.

(Oh dear.... now Islamabad's in the sights of the evil doing Taliban. They should never have tempted fate by calling it Islamabad. It was like calling Tel-Aviv or Jerusalem 'Judaismsucks').

# 17. virtualpagan

A very good piece of reading, Does it mean that the IMF is to be call in a.s.a.p?

the tax increase on upper earners is meaningless and i will bet my tax bill that it does not bring in anything like £7 billion...like all of AD's forecasts thet would be better coming from disneyland....
+3.5% growth in 2011!! the uk never managed these growth levels even during the "boom" so his forecast is based on consumer spending above that which caused the problem...or massive inflation..... and whilst we are talking of debt, there appears in all these gruesome figures not any mention of the off balance sheet debts...PFI, public sector pensions etc, these far outweigh the figures of debt mentioned in the budget.How does the chancellor think he is going to finance it all?

Stephanie,
Dont worry - the 50% rate isnt going to balance the books in the long term. Talking of small print, I notice the extraordinary growth forecasts for GDP in the Budget have some very serious qualifications : " B.45 The forecast assumes that the Government's interventions to improve flow of credit in the economy ensure that a sufficient volume of credit will be available to support economic recovery." Then, it goes on to say " The Budget 2009 forecast adopts the forecasting assumption that the MPC's decision to purchase 75 billion of assets, just over 5% of money GDP in 2008, is successful in raising nominal GDP by approximately that amount over the normal horizon over which monetary policy affects inflation and GDP groth." Box B5. Is that 2 years?

Can you offer your considered view on how these assumptions, if wrong, could affect the growth forecast here.

Stephanie,
The government is forecasting that debt will rise to GBP 175 billion this year but I also understand that they propose to raise GBP 220 billion this year through Gilt sales to cover the debt, a trifling GBP 45 billion difference! Is the revision of last years debt figure released yesterday by the office of government statistics and the GBP 45 billion gap between forecast debt and gilt sales in any way related?
Could it possible be that by posting some of this years debt into last years figure (which has been lost by the media as it focussed on the budget)has helped to keep this years delcared debt forecast below GBP200 billion just a thought?

Given that the predictions of amount raised is presumably based on the predictions of gdp growth which have been universally panned, I can be somewhat sceptical about their accuracy.

The experience of reducing top rate tax from 60% to 40% was that tax take went up - so Govt is either gambling that the tipping point (ie when reducing taxes actually reduces tax take) is between 40% and 50% is there any international evidence to back them up? Or (as I suspect) basing it on a wing and a prayer.

Lets assume that the very rich do not simply up and leave or become non-doms paying £30,000 a year only, is there a way they can entirely legally save tax. Yes, it is a bit complicated and a hassle and probably costs you circa 10% of your income but there are ways of doing this - and that is assuming you cannot simply convert income into capital gains and pay tax at 18% only. The people who benefit will be tax lawyers and accountants.

Given that the effective tax rate for people earning over £100,000 is 60%+ until £113k is reached I can forsee a lot of mass marketed tax saving schemes being promoted in April 2010.

The problem is......everyone has been mischievously led to believe (the certeris paribus of Liberal-Democracies?) that people are basically all the same in terms of potential, or are at least, are malleable enough for educational and economic contingencies to rightmost inequalities, at least in principle. Alas, it just isn't true basd on the research. So, in recent decades we've slowly, and for most imperceptibly (because the mask of automation/computerisation has reduced the need for native intelligence I suspect) made a mess of the birth-rate, skewing it towards the less able, whilst simultaneously bringing in many low-skilled people (of whatever race) who have high birth-rates (it's just the way it goes, abilty and TFR are highly negatively correlated), whilst also taking apart the state/regulation - we've effectively committed national suicide from what I can make out.

As you read this, please remember, around 20% of the adult population has a literacy/numeracy level of 11 year olds and it's getting worse for what should be obvious reasons. They don't frequent these sites etc.

It's an odd thing we've done. Perhaps Stephanie and friends could provide some counter-evdidence? I can't find any...

21 jadedjean

I do think your nefarious rhetoric is coming on a treat. Much improved. Its good to see street jive coming through. : )

27 ''they don't frequent these sites'' You won't reach them then will you dude. ha ha

''But, the big question continues to be whether these forecasts are plausible.''

Say no more. So data on forecast accuracy in stress situations would be worth doing surely. There is no point in talking about a forecast unless you can put some figure of certainty on it. But I guess we know the ball park figure already don't we. Using the my-stomach-feels-queasy-oh-meter.

No.27. JadedJean

Don't forget, the older generation sold their houses at the peak of the market, for over-inflated prices, and moved abroad.....
Was this a wise move on their part?

I remain here in Britain, not having made any money directly from the housing boom.

Britain, despite your faults, I love you still.

"In the fine print" sums up many of the problems of the last 13 years

A prime example was IR35, it was the fine print of a press release

it has been the trade mark of Zanu-labour budgets and its also been
a trade mark of the jorno's NOT to look to deeply at this fine print too

MrTweedy (#30) "Britain, despite your faults, I love you still."

You'd have probably missed its eccentrics - which are still alive and kicking here and there ;-0)

glanafon (#28) "I do think your nefarious rhetoric is coming on a treat."

Just remember... what seems arcane and academic to some is often just harsh, albeit unfamiliar, reality. Your glib words may well come back to haunt you.

34 jj

''Your glib words may well come back to haunt you.''

I doubt it. The reality is attitude gives altitude and there is always space for those who want to fly. I try to deal with things I can do myself or influence and that is the limit of it. To go outside that envelope is a waste of time so I try to avoid it, although I do not always succeed.

BTW Innovators are compelled to innovate, creative people are compelled to be creative. Successful people are compelled to succeed. Teachers to teach. etc.

Change is part of process. There is no reset button and moving forward has to be based on what has gone before and what exists in the current environment. To have positive effect continuity is important even when a change in direction is needed.

Continual small change in the right direction is better than large step discontinuities, it gives more time for evolutionary pressures to work. It also gives more time for assessment of whether problems are identified correctly and if solutions are likely to indeed improve the situation. And gives the process time to junk stuff that doesnt stack up.

You tacitly acknowledge small creeping changes in one direction can mount up which is why the measurands you have arbitarily selected concern you. So you acknowledge the process works.

Continual small changes can mount up surprisingly quickly. Large discontinuities however eradicate diversity culturally and biologically. The gross intervention model cannot work because it has no collective basis which is required in contemporary western culture, such an intervention would also have profound side effects and consequences that nobody can postulate.

The issue is providing enough space for developments to gradually occur. I am not against scientific language but by definiton it is only really effective between linguists. Communication of complex issues is via dumbing down but not corrupting the message. The only way gross intervention can succeed is in the short term abusing of trust and manipulating people, the recent bankers party is an example, 1930s Germany was another. An aggreived backlash then occurs and can be long lasting, far longer than the attempted gross intervention, as the banks are due to find out.

On a subject you appear interested in eugenics, the topic was subject to some intelligentsia support outside Germany including the USA and the UK in the 1920s and 1930s. Although enthusiam disappeared after WW2, and I would say thankfully. 1930s 1940s events destroyed the issue of eugenics, that was the extent of aggreived opposition. I don't support eugenics because I am not convinced there is a problem or that if there is some sort of problem that it has been correctly identified. It is also a gross intervention so is highly dangerous with many side effects and unforeseen consequences. Gross interventions are damaging to some target, that is the point in them. Damage is just that, damaging, so should be avoided. Finally as I have pointed out before that topic has no collective support.

My observation is stupid people can be remarkably smart when they understand the situation. I think you will find a large number of people understand tectonic plate movement and earthquakes. How is this possible when so many specialists did not understand it for so long. I think a even greater number of people now understand the bankers game now. These understandings are happening remarkably quickly in the general scheme of things don't you think.

Ideas are so subversive if they are right. They even corrupt the opposition, who cannot avoid engaging in them. And engaging with the right idea and then still trying to fight them is entirely self destructive. It overwhelms them, re Darwin and Hooker, Darwin didnt even want a debate, Hooker who did a great deal of good work is seen as a clown now.

BTW I'm not saying I am right, that is in the proof of the pudding. ; )

I am however enjoying seeing you engage with nefarious rhetoric and will be most interested to see if you can disengage from it.

nefariously in rhetoric, lol.

34 erratum

''I am however enjoying seeing you engage with the use of nefarious rhetoric and will be most interested to see if you can disengage from the use of it.''

This post refers to yr post 33, not 34 which is my post. : )

Glanafon (##34) "To go outside that envelope is a waste of time" Do you live in an envelope then? Doe st at make you a letter?

"1930s 1940s events destroyed the issue of eugenics, that was the extent of aggreived opposition."

No, people just changed the name to healthy family planning and genetic counselling etc! (oh, and 'don't marry and have kids with him/her!'

"My observation is stupid people can be remarkably smart when they understand the situation."

No, don't believe it. Stupid people really do tend to do pretty stupid things quite a lot. It's very hard not to notice that these days. I'm surprised you haven't noticed. Take the economy for example ...

36 jj

Your getting more nefarious by the minute. : )

glanafon (#34)

JadedJean: "Your glib words may well come back to haunt you."

Glanafon: "I doubt it. The reality is attitude gives altitude and there is always space for those who want to fly."

Of course you doubt it. But what if that is precisely my point? What if your concern for your self-esteem (if extreme it's that called narcissism and it can blind one) is overshaddowing your ability to see what I am urging you to look at? What if your doubts and judgement are not perfectly sound? What if you need to learn in this instance?

If you look to the evidence that I keep highlighting, that's what you are inadvertently doubting in your 'Oppositional Defiance', not me who you clearly don't know (not that that matters anyway as it would be the same inavlaid argumnet from authority/celebrity/iniquity/ad hominem). What you (like a few others have done here) is make a classic 'attribution error' or 'credit assignment problem' error. Note, 'attribution error' like 'credit assignment problme' are technical terms - you need to grasp what fields they are used in before deciding whether in fact you agree or not, else you risk not really knowing whether you agree or not. ;-)

#38 Jadedjean. My word you get around. "Attribution error" also has a non technical meaning. For example if you make a statement and then immediately claim that I made that statement, then that is what most people would understand by the phrase attribution error.

You should know this, you did it to me a few weeks ago. I do hope my pointing out this simple attribution error on your part does not leave me open to the charge of being oppositionally defiant.

armagediontimes (#39) Try not to draw so much attention to yourself. Instead focus on the points made in say #6 and #21 (MrTweedy and John_from_Hendon often make sound, if not better contributions). Then I won't be inclined to point out that you're prone to Oppositional Defiance and narcisssim etc. There are some very important issues worth discussing given the way the economy is now massively 'correcting', but our dismal demographics, and absence of real choice between the major parties may end up with the electorate serving the interests of the venal people who brought this all about if my analyses and conclusions are well founded.