Help me understand, Interest rates / vat / liz truss
Discussion
Hoping someone more in touch with economics or reality can make sense of what I can’t.
Boe increase rates of late, more aggressively than seen in the past 40yrs, with the speculators speculating that we’ll see 4% base rate next year. All to curb inflation. Less money in the pocket to reduce inflation i am lead to believe, fair enough.
Then we’ve liz truss newly appointed PM hinting she’s away to reduce national insurance and vat. In the name of easing cost of living.
Is that not counter intuitive to now reduce vat & NI while the banks are attempting to reduce inflation. ??
Is there an easy way to explain the actions of our banks and governments!?
I’m no expert but surely giving the pot of financial rescue quoted £100B directly to the energy company to reduce the tariffs we as the consumer pay. Am I alone in thinking this is a better idea
Boe increase rates of late, more aggressively than seen in the past 40yrs, with the speculators speculating that we’ll see 4% base rate next year. All to curb inflation. Less money in the pocket to reduce inflation i am lead to believe, fair enough.
Then we’ve liz truss newly appointed PM hinting she’s away to reduce national insurance and vat. In the name of easing cost of living.
Is that not counter intuitive to now reduce vat & NI while the banks are attempting to reduce inflation. ??
Is there an easy way to explain the actions of our banks and governments!?
I’m no expert but surely giving the pot of financial rescue quoted £100B directly to the energy company to reduce the tariffs we as the consumer pay. Am I alone in thinking this is a better idea
I agree.
Most of this inflation is down to energy costs. Surely if the government is going to dish out a load of billions then surely using that to cap the rate of gas and electric to everyone including and most importantly business is the way to go.
Instantly would cut the headline inflation figure.
Of course though what governments seem to love is crazy schemes which are massively complicated, employ a few thousand civil servants and are open to fraud.
And then people wonder why conspiricay theories are created.
Most of this inflation is down to energy costs. Surely if the government is going to dish out a load of billions then surely using that to cap the rate of gas and electric to everyone including and most importantly business is the way to go.
Instantly would cut the headline inflation figure.
Of course though what governments seem to love is crazy schemes which are massively complicated, employ a few thousand civil servants and are open to fraud.
And then people wonder why conspiricay theories are created.
The base rate increases 'help' to stop our currency devaluing, it has devalued a lot in the last year and would almost certainly be worse if we'd not raised rates. A devaluing pound means we pay more for stuff (that we import and/or is priced in another currency - which is a lot) even if it doesn't cost any more for the supplier in the other country to produce it.
Currently we are getting a double whammy, ie it does cost the suppliers more to produce and our pound is worth less than it used to be.
So I think there is a balancing act going on, rate rises to help the currency overall and the other measures to help with the cost of living?
Currently we are getting a double whammy, ie it does cost the suppliers more to produce and our pound is worth less than it used to be.
So I think there is a balancing act going on, rate rises to help the currency overall and the other measures to help with the cost of living?
Well yeah the business loans of covid are a prime example….who couldn’t see which direction that would take.
The government apparently
Energy tariffs staggered in increments of use for both domestic and commercial use. Let the energy companies handle it.
Surely that’s the best step forward ??
The government apparently
Energy tariffs staggered in increments of use for both domestic and commercial use. Let the energy companies handle it.
Surely that’s the best step forward ??
I get the interest rate rise to hold against the dollar.
That makes sense, the potential care package doesn’t.
Use funds to address the elephant in the room, not to hand out to be used towards other means. Generally people are too thick to budget simple household bills. So a vat cut won’t necessarily mean money for heat.
That makes sense, the potential care package doesn’t.
Use funds to address the elephant in the room, not to hand out to be used towards other means. Generally people are too thick to budget simple household bills. So a vat cut won’t necessarily mean money for heat.
Edible Roadkill said:
Hoping someone more in touch with economics or reality can make sense of what I can’t.
Boe increase rates of late, more aggressively than seen in the past 40yrs, with the speculators speculating that we’ll see 4% base rate next year. All to curb inflation. Less money in the pocket to reduce inflation i am lead to believe, fair enough.
Then we’ve liz truss newly appointed PM hinting she’s away to reduce national insurance and vat. In the name of easing cost of living.
Is that not counter intuitive to now reduce vat & NI while the banks are attempting to reduce inflation. ??
Is there an easy way to explain the actions of our banks and governments!?
I’m no expert but surely giving the pot of financial rescue quoted £100B directly to the energy company to reduce the tariffs we as the consumer pay. Am I alone in thinking this is a better idea
Short answer: sort of.Boe increase rates of late, more aggressively than seen in the past 40yrs, with the speculators speculating that we’ll see 4% base rate next year. All to curb inflation. Less money in the pocket to reduce inflation i am lead to believe, fair enough.
Then we’ve liz truss newly appointed PM hinting she’s away to reduce national insurance and vat. In the name of easing cost of living.
Is that not counter intuitive to now reduce vat & NI while the banks are attempting to reduce inflation. ??
Is there an easy way to explain the actions of our banks and governments!?
I’m no expert but surely giving the pot of financial rescue quoted £100B directly to the energy company to reduce the tariffs we as the consumer pay. Am I alone in thinking this is a better idea
Longer answer: They're doing the wrong thing. The simpler option (and hence NI cut) is to cut taxation. Which doesn't alter notional growth or GDP per capita but does permit ordinary normal hard working folk to keep their money and their households going, which in turn helps the economy avoid a downturn in an inflationary environment (stagflation). The inflationary environment is caused by monetary expansion, and whilst we know for a fact that either monetary contraction or rising interest rates will combat that effectively, we don't have much empirical evidence for anything else, so no one is willing to try anything new.
Mr_Megalomaniac said:
Short answer: sort of.
Longer answer: They're doing the wrong thing. The simpler option (and hence NI cut) is to cut taxation. Which doesn't alter notional growth or GDP per capita but does permit ordinary normal hard working folk to keep their money and their households going, which in turn helps the economy avoid a downturn in an inflationary environment (stagflation). The inflationary environment is caused by monetary expansion, and whilst we know for a fact that either monetary contraction or rising interest rates will combat that effectively, we don't have much empirical evidence for anything else, so no one is willing to try anything new.
That’s perhaps an optimistic view.Longer answer: They're doing the wrong thing. The simpler option (and hence NI cut) is to cut taxation. Which doesn't alter notional growth or GDP per capita but does permit ordinary normal hard working folk to keep their money and their households going, which in turn helps the economy avoid a downturn in an inflationary environment (stagflation). The inflationary environment is caused by monetary expansion, and whilst we know for a fact that either monetary contraction or rising interest rates will combat that effectively, we don't have much empirical evidence for anything else, so no one is willing to try anything new.
Maybe I am more cynical, but I’d wager that a cut in VAT rate will have no impact whatsoever on the end price that consumers pay for many goods and services. Sure, larger firms can be leant on in an effort to ensue that the cut is passed on it, against a backdrop of rising costs and wage demands, it’s easy to see some firms decide to counterbalance any VAT cut with a price rise.
Any truth in this? Most PHers would end up with a decent amount of extra pay each months, maybe she'll get rid of the £100k personal allowance taper....the 50%+ tax burden is one of the consistent topics on here.
Maybe our next PM gets her finance policies from here!! But lower taxes, freez energy bills, all sound like amazing things for voters.........who pays for it all, does any one care as long as take home pay goes up??
https://inews.co.uk/news/politics/liz-truss-consid...
Maybe our next PM gets her finance policies from here!! But lower taxes, freez energy bills, all sound like amazing things for voters.........who pays for it all, does any one care as long as take home pay goes up??
https://inews.co.uk/news/politics/liz-truss-consid...
Lowering taxes makes total sense, people effectively earn more and then they will spend more in that economy promoting growth.
I have never understood the mentality of tax tax tax. I am sure more could be generated by taxing less but selling more.
Although i don't see how on earth lowering taxes right now will help the current situation. it wont help those at the bottom but i suppose it might keep the middle spending and keeping business afloat. I know in my situation that we can afford the bills but if everyone stops spending and i have no work then im f
ked. Along with everyone else i imagine.
I have never understood the mentality of tax tax tax. I am sure more could be generated by taxing less but selling more.
Although i don't see how on earth lowering taxes right now will help the current situation. it wont help those at the bottom but i suppose it might keep the middle spending and keeping business afloat. I know in my situation that we can afford the bills but if everyone stops spending and i have no work then im f
ked. Along with everyone else i imagine.Why not just up the interest rate to 5 or 6%? That would mean more foreign investment buying sterling and would increase the strength of the pound against the dollar, currently at $1.14 to the £. That would hugely reduce energy costs. Because the high cost of energy is not primarily due to the high cost of oil and gas on the world market. It is high, but it's been much higher in the past. It's because energy is traded in dollars so it's costing a fortune because the pound is so weak. If we could get the £ to $2, we reduce energy costs by almost a half.
gangzoom said:
Any truth in this? Most PHers would end up with a decent amount of extra pay each months, maybe she'll get rid of the £100k personal allowance taper....the 50%+ tax burden is one of the consistent topics on here.
It is a ceiling to drawing more earnings / working harder / investing in growth for a small company.Edible Roadkill said:
gangzoom said:
This would be amazing !! Edible Roadkill said:
Looks like the care package is going to be in the form of utilities rates freeze going by this mornings news.
Liz must be a ph subscriber after all
Capping the retail price and backing bond issues by the utilities so that they can store the massive losses for the short term while permanently elevated retail costs over years are used to pay back the 'loan' to the consumer is a workable solution. Liz must be a ph subscriber after all
High consumer energy costs will do the job of sucking out excess money in the economy and stopping them from going too high will prevent the catastrophic rent defaults and collapse in spending at the lower end of the market.
Interest rates will just need to keep roughly mapping the US so as to protect the GBP from the worst damage.
LooneyTunes said:
That’s perhaps an optimistic view.
Maybe I am more cynical, but I’d wager that a cut in VAT rate will have no impact whatsoever on the end price that consumers pay for many goods and services. Sure, larger firms can be leant on in an effort to ensue that the cut is passed on it, against a backdrop of rising costs and wage demands, it’s easy to see some firms decide to counterbalance any VAT cut with a price rise.
The cynic in me agrees that firms will be unlikely to pass on the VAT cut to the end-customer. I personally am more in favour of a cut to income tax rates, NI, and so forth.Maybe I am more cynical, but I’d wager that a cut in VAT rate will have no impact whatsoever on the end price that consumers pay for many goods and services. Sure, larger firms can be leant on in an effort to ensue that the cut is passed on it, against a backdrop of rising costs and wage demands, it’s easy to see some firms decide to counterbalance any VAT cut with a price rise.
Cutting VAT to 15% or 10% would be lovely if there was some kind of pricing audit but I don't think that's feasible.
Mr_Megalomaniac said:
The cynic in me agrees that firms will be unlikely to pass on the VAT cut to the end-customer. I personally am more in favour of a cut to income tax rates, NI, and so forth.
Cutting VAT to 15% or 10% would be lovely if there was some kind of pricing audit but I don't think that's feasible.
Agreed, it would amount to the same as the recent fuel duty reduction where next to nothing made it to the customer.Cutting VAT to 15% or 10% would be lovely if there was some kind of pricing audit but I don't think that's feasible.
I think rescue billions need to be applied at source instead of dripped through many hands and not to those most needed.
Mr_Megalomaniac said:
LooneyTunes said:
That’s perhaps an optimistic view.
Maybe I am more cynical, but I’d wager that a cut in VAT rate will have no impact whatsoever on the end price that consumers pay for many goods and services. Sure, larger firms can be leant on in an effort to ensue that the cut is passed on it, against a backdrop of rising costs and wage demands, it’s easy to see some firms decide to counterbalance any VAT cut with a price rise.
The cynic in me agrees that firms will be unlikely to pass on the VAT cut to the end-customer. I personally am more in favour of a cut to income tax rates, NI, and so forth.Maybe I am more cynical, but I’d wager that a cut in VAT rate will have no impact whatsoever on the end price that consumers pay for many goods and services. Sure, larger firms can be leant on in an effort to ensue that the cut is passed on it, against a backdrop of rising costs and wage demands, it’s easy to see some firms decide to counterbalance any VAT cut with a price rise.
Cutting VAT to 15% or 10% would be lovely if there was some kind of pricing audit but I don't think that's feasible.
My worry about any PM in charge now is that they will focus on winning over their easy electorate as opposed to doing the right thing.
But, if energy prices are capped then one has to be asking why we need tax cuts at the moment when there are Covid costs to be paid back and which should be paid back by those who benefitted from them as opposed to knocking it on to the next generations?
We'll have to see what comes out over the coming weeks but I'd prefer a change and reversion to favouring small business over multinationals as their inefficiencies retain more wealth within a community and present more opportunity. I think we've had long enough believing multinationals are a cure for everything and they've arguably become part of the problem.
Edible Roadkill said:
This would be amazing !!
It definitely won't happen, it is far too controversial as the general public think that somebody earning £80,000 a year has the lifestyle of an oil baron. £50k is very low for a doubling of the rate of income tax in 2022 in my opinion. It is very frustrating losing 43.25% (inc NI) of every penny over £50,270 when trying to earn a bit more to support your family.
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