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Inflation

including Budgets
ursaminortaur
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Re: Inflation

#635135

Postby ursaminortaur » December 19th, 2023, 9:27 pm

1nvest wrote:Without having checked, IIRC October of last year was pretty much the month on month greatest peak in increasing rate of inflation, so year on year had to fall otherwise things would be really bad. Less a case of things are improving, more a case of things aren't continuing to get worse, have instead leveled off.

The UK's pretty much fubar, seen as a clown, and where its next 5 years government will have to cater for a further 50% increase in taxation in having driven the 1% that pay a third of the tax take out of the country. Europe will do well, welcome that 1% number of net contributors as that helps cut the taxation in whatever country(s) the 1% flight to.

And that's all before Lab gets its hands on the public purse and where it will be pretty much unopposed in the House, free to implement even its wildest dreams (extremes).


The overall tax burden as a percentage of GDP was fairly stable under Blair and Brown falling to a low of 31.1% in 2009 from 32.6% in 2000 and was below the average for OECD countries.

https://www.oecd.org/tax/revenue-statistics-united-kingdom.pdf

The tax-to-GDP ratio in the United Kingdom has increased from 32.6% in 2000 to 35.3% in 2022. Over the same period, the OECD average in 2022 was above that in 2000 (34.0% compared with 32.9%). During that period, the highest tax-to-GDP ratio in the United Kingdom was 35.3% in 2022, with the lowest being 31.1% in 2009.

1nvest
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Re: Inflation

#635162

Postby 1nvest » December 20th, 2023, 3:54 am

ursaminortaur wrote:
1nvest wrote:Without having checked, IIRC October of last year was pretty much the month on month greatest peak in increasing rate of inflation, so year on year had to fall otherwise things would be really bad. Less a case of things are improving, more a case of things aren't continuing to get worse, have instead leveled off.

The UK's pretty much fubar, seen as a clown, and where its next 5 years government will have to cater for a further 50% increase in taxation in having driven the 1% that pay a third of the tax take out of the country. Europe will do well, welcome that 1% number of net contributors as that helps cut the taxation in whatever country(s) the 1% flight to.

And that's all before Lab gets its hands on the public purse and where it will be pretty much unopposed in the House, free to implement even its wildest dreams (extremes).


The overall tax burden as a percentage of GDP was fairly stable under Blair and Brown falling to a low of 31.1% in 2009 from 32.6% in 2000 and was below the average for OECD countries.

https://www.oecd.org/tax/revenue-statistics-united-kingdom.pdf

The tax-to-GDP ratio in the United Kingdom has increased from 32.6% in 2000 to 35.3% in 2022. Over the same period, the OECD average in 2022 was above that in 2000 (34.0% compared with 32.9%). During that period, the highest tax-to-GDP ratio in the United Kingdom was 35.3% in 2022, with the lowest being 31.1% in 2009.

Roy Jenkins, the then Labour Chancellor, in 1968 applied a retrospective taxation of a (top rate) 130% amount. For each £1 earned, a individual was expected to pay Labour (taxman) £1.30. During the 1960's the Beatles released 'Taxman', lyrics along the lines of "19 for you, 1 for me" in reflection of 95% taxation rates. 5p (half a shilling (sixpence) in pre-decimal money) retained out of each £1 earned). David Bowie, Rolling Stones ...etc opted to self exile rather than remain liable to such taxation rates. Any political party with such a extreme history might reasonably be expected to fold that brand name, reform under a new name, Labour haven't, implying that such potential taxation rates are considered as being perfectly acceptable if/when that party so deems. But equally so do the other major party, recent graduates for instance might be seeing 20% basic rate tax, 10% student tax, 12% national insurance 'tax' ... be starting where they have (relatively) sizable debts, that are rising sharply (moderate/high inflation) and where they're being taxed at over a 40% tax rate, retaining less than 60p out of every £1 earned. Many simply opt to remain idle rather than work extra hours that take them into that higher taxation rate. Is a deliberate state policy to promote disincentive, or self-exile.

Me, I'd rather policies where the 1% that pay a third of the tax-take, are doubled in number, or better still trebled in number, as that could mean the 97% remainder not having to pay any tax. LT/KK policies were a urgent push towards that, however others sought to kill that asap and drive the complete opposite (Sunak/Berkeley). Those with sound ideas/preferences have been vilified (LT/KK/SB) for their preferences of sound economics and/or free speech. To leave predominately a Remainer style set as the only choice - who seemingly most prefer self-harm. The realistic choice for voters at the next GE is for which choice of self-harm they might more prefer (or the choice that might lead to the lower degree of pain).

Itsallaguess
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Re: Inflation

#635177

Postby Itsallaguess » December 20th, 2023, 7:16 am


From the BBC this morning -

UK inflation falls to 3.9% in November -

UK inflation slowed to 3.9% in the year to November, according to the Office for National Statistics - the lowest rate for two years.

It has fallen from 4.6% in October.

The rate of inflation for November is lower than expected. Some economists had predicted that it would slow from 4.6% to 4.3% or even 4%.

But at 3.9%, that has beaten everyone's forecasts.


https://www.bbc.co.uk/news/live/uk-67757979

Cheers,

Itsallaguess

Tedx
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Re: Inflation

#635178

Postby Tedx » December 20th, 2023, 7:24 am

BOE to hike by 0.5%

Probably.

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Re: Inflation

#635180

Postby GoSeigen » December 20th, 2023, 7:36 am

Itsallaguess wrote:
From the BBC this morning -

UK inflation falls to 3.9% in November -

UK inflation slowed to 3.9% in the year to November, according to the Office for National Statistics - the lowest rate for two years.

It has fallen from 4.6% in October.

The rate of inflation for November is lower than expected. Some economists had predicted that it would slow from 4.6% to 4.3% or even 4%.

But at 3.9%, that has beaten everyone's forecasts.


https://www.bbc.co.uk/news/live/uk-67757979



Good inflation figures, This means that at last there is a tightening bias to UK base rates which are now above the rate of inflation. It will be interesting to observe through 2024 whether they are high enough to keep a lid on the economy. There's now a really bullish setup for the next 12 months or more so I expect a return of the animal spirits. Tedx's forecast of another 0.5% of rises in 2024 (I assume that's what he means) might not be far wrong, given how doveish market expectations are.

GS

Itsallaguess
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Re: Inflation

#635181

Postby Itsallaguess » December 20th, 2023, 7:37 am

GoSeigen wrote:
Tedx's forecast of another 0.5% of rises in 2024 (I assume that's what he means) might not be far wrong, given how doveish market expectations are.


I think he meant by lunchtime today...

:O)

Cheers,

Itsallaguess

vand
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Re: Inflation

#635186

Postby vand » December 20th, 2023, 8:22 am

3.9% is better than the doves would be hoping for.

Here is where it really pays to understand how markets work and lead the narrative. If you didn't follow the markets and just listened to the words coming out of Bailey's cakehole you'd have still believed that inflation was the threat all the way up to Oct/Nov and the 5.25% base rate was entirely justified. If you understand how markets work you'll already know that when the "higher for longer" rhetoric is at is zenith and everyone else is losing their minds that the only way is up then that is pretty much the peak of it.

The BoE's work is pretty much done at this point, other than the *threat* of keeping rates higher that they have to keep saying. The markets have basically moved on and done the repricing for them - yield on the 10yr gilt has fallen by 100bps in the last 2 months.

https://bigcharts.marketwatch.com/quick ... ow=&time=7

In 6 months' time, inflation will not be the primary concern and we will be in cutting mode.

tjh290633
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Re: Inflation

#635234

Postby tjh290633 » December 20th, 2023, 11:36 am

I see that the indices actually fell in November, but haven't looked for the reason. Oil price probably. Traditionally there is a fall in January, because of the effect of the sales in the retail sector. Now the diversion of oil tankers and other shipping from the Red Sea is expected to increase the oil price.

According to Earn01.xls, average earnings fell in October. We know minimum/living wages are due to rise in April. Is the BofE going to turn doveish? If you compare the effect of a variable input on the parameter to be controlled, like fuel into a furnace, it tends to be the second derivative that is the governing factor, i.e. d2T /dt2. By comparison, the interest rate should be determined by the second derivative of the inflation index. That has now peaked and is falling rapidly, so the interest rate should be falling quickly. Does the MPC have any idea about control algorithms?

TJH

88V8
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Re: Inflation

#635240

Postby 88V8 » December 20th, 2023, 11:51 am

tjh290633 wrote:...the interest rate should be determined by the second derivative of the inflation index. That has now peaked and is falling rapidly, so the interest rate should be falling quickly.

But 3.9% is not 2%.
Mind you, I would not be surprised if there is a rate cut next year given the govt no doubt will be pressing the (independent) bank in that direction but I will be amazed if there is an increase from here.

V8

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Re: Inflation

#635242

Postby Tedx » December 20th, 2023, 11:54 am

With the full effect of previous rate increases yet to be factored in I would be surprised if the Bank of England didn't under shoot their inflation target

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Re: Inflation

#635248

Postby 88V8 » December 20th, 2023, 11:58 am

Tedx wrote:With the full effect of previous rate increases yet to be factored in I would be surprised if the Bank of England didn't under shoot their inflation target

Let's hope so.
The last increase in my DB pension was 3%.

V8

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Re: Inflation

#635249

Postby tjh290633 » December 20th, 2023, 11:59 am

88V8 wrote:
tjh290633 wrote:...the interest rate should be determined by the second derivative of the inflation index. That has now peaked and is falling rapidly, so the interest rate should be falling quickly.

But 3.9% is not 2%.
Mind you, I would not be surprised if there is a rate cut next year given the govt no doubt will be pressing the (independent) bank in that direction but I will be amazed if there is an increase from here.

V8

No, it's not. But with such a steep falling slope, the bank rate ought to be falling, so as not to overshoot the target.

TJH

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Re: Inflation

#635251

Postby Tedx » December 20th, 2023, 12:01 pm

Hmmm. Undershoot/overshoot their target?

Less than 2% is what I meant anyway.

ursaminortaur
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Re: Inflation

#635293

Postby ursaminortaur » December 20th, 2023, 1:27 pm

1nvest wrote:
ursaminortaur wrote:
The overall tax burden as a percentage of GDP was fairly stable under Blair and Brown falling to a low of 31.1% in 2009 from 32.6% in 2000 and was below the average for OECD countries.

https://www.oecd.org/tax/revenue-statistics-united-kingdom.pdf


Roy Jenkins, the then Labour Chancellor, in 1968 applied a retrospective taxation of a (top rate) 130% amount. For each £1 earned, a individual was expected to pay Labour (taxman) £1.30. During the 1960's the Beatles released 'Taxman', lyrics along the lines of "19 for you, 1 for me" in reflection of 95% taxation rates. 5p (half a shilling (sixpence) in pre-decimal money) retained out of each £1 earned). David Bowie, Rolling Stones ...etc opted to self exile rather than remain liable to such taxation rates. Any political party with such a extreme history might reasonably be expected to fold that brand name, reform under a new name, Labour haven't, implying that such potential taxation rates are considered as being perfectly acceptable if/when that party so deems. But equally so do the other major party, recent graduates for instance might be seeing 20% basic rate tax, 10% student tax, 12% national insurance 'tax' ... be starting where they have (relatively) sizable debts, that are rising sharply (moderate/high inflation) and where they're being taxed at over a 40% tax rate, retaining less than 60p out of every £1 earned. Many simply opt to remain idle rather than work extra hours that take them into that higher taxation rate. Is a deliberate state policy to promote disincentive, or self-exile.

Me, I'd rather policies where the 1% that pay a third of the tax-take, are doubled in number, or better still trebled in number, as that could mean the 97% remainder not having to pay any tax. LT/KK policies were a urgent push towards that, however others sought to kill that asap and drive the complete opposite (Sunak/Berkeley). Those with sound ideas/preferences have been vilified (LT/KK/SB) for their preferences of sound economics and/or free speech. To leave predominately a Remainer style set as the only choice - who seemingly most prefer self-harm. The realistic choice for voters at the next GE is for which choice of self-harm they might more prefer (or the choice that might lead to the lower degree of pain).



Sorry but you are looking at top tax rates in the 1960s when it was common practice across all the developed economies to have high income tax rates (and high top tax rates in unearned income). Thatcher changed that by switching from high direct taxation, such as income tax, to higher indirect taxation.

A better measure of taxation in the UK at that time is the total tax burden as a percentage of GDP and that was lower than the 35.3% it was in 2022. That was higher than a lot of other developed countries but that was a consequence of successive governments running budget surpluses in order to reduce the debt built up by the UK during WW2 as a percentage of GDP.

See

Chart B: Tax burdens in the UK, G7 and EU14 since 1965

https://obr.uk/box/the-uks-tax-burden-in-historical-and-international-context/


and a graph of the budget surpluses after WW2 up until the 1970s and the subsequent budget deficits

https://www.ukpublicspending.co.uk/rev/google_vis.php?title=UK%20Deficit%20Since%20World%20War%20II&year=1947_2023&sname=United_Kingdom&units=p&bar=0&stack=1&size=800_600&col=g&spending0=3.26_-1.62_-5.68_-6.61_-5.81_-4.63_-3.32_-2.67_-2.53_-3.55_-2.99_-3.14_-2.94_-1.09_-0.90_-1.84_-1.96_-2.09_-3.38_-3.76_-3.74_-3.36_-5.64_-7.01_-6.13_-3.89_-2.00_-0.95_0.12_0.65_0.36_0.63_1.58_1.07_1.98_0.58_0.69_1.12_1.26_0.60_0.87_0.66_-0.93_-0.70_0.11_2.04_5.03_5.60_4.40_3.21_2.70_0.58_-0.50_-1.51_-1.75_-0.50_1.49_1.67_1.76_1.30_0.94_1.18_4.51_7.24_6.25_5.42_5.30_4.24_3.26_2.54_0.91_0.60_-0.10_0.83_11.54_3.06_3.49&legend=Current%20Budget%20Deficit-total&source=a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a&inline=

Lootman
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Re: Inflation

#635296

Postby Lootman » December 20th, 2023, 1:38 pm

ursaminortaur wrote:you are looking at top tax rates in the 1960s when it was common practice across all the developed economies to have high income tax rates (and high top tax rates in unearned income). Thatcher changed that by switching from high direct taxation, such as income tax, to higher indirect taxation.

A better measure of taxation in the UK at that time is the total tax burden as a percentage of GDP

Disagree. Thatcher broadened the tax base which enabled lower marginal tax rates for most people.

My salary increased dramatically from 1975, when I started work after university, until the 1990s, when I retired. And yet the highest tax rate I paid on a portion of my salary only went up from 35% to 40%. And that happened because the load was spread more widely and fairly.

You have to look at the actual rates that people pay and not just some aggregate figure.

ursaminortaur
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Re: Inflation

#635315

Postby ursaminortaur » December 20th, 2023, 2:31 pm

Lootman wrote:
ursaminortaur wrote:you are looking at top tax rates in the 1960s when it was common practice across all the developed economies to have high income tax rates (and high top tax rates in unearned income). Thatcher changed that by switching from high direct taxation, such as income tax, to higher indirect taxation.

A better measure of taxation in the UK at that time is the total tax burden as a percentage of GDP

Disagree. Thatcher broadened the tax base which enabled lower marginal tax rates for most people.

My salary increased dramatically from 1975, when I started work after university, until the 1990s, when I retired. And yet the highest tax rate I paid on a portion of my salary only went up from 35% to 40%. And that happened because the load was spread more widely and fairly.

You have to look at the actual rates that people pay and not just some aggregate figure.


Sorry but by concentrating on income tax rates you are ignoring the rise in indirect taxation ( eg raising VAT from 8% to 15% in 1979 ) which affected you.

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Re: Inflation

#635321

Postby Lootman » December 20th, 2023, 2:40 pm

ursaminortaur wrote:
Lootman wrote:Disagree. Thatcher broadened the tax base which enabled lower marginal tax rates for most people.

My salary increased dramatically from 1975, when I started work after university, until the 1990s, when I retired. And yet the highest tax rate I paid on a portion of my salary only went up from 35% to 40%. And that happened because the load was spread more widely and fairly.

You have to look at the actual rates that people pay and not just some aggregate figure.

Sorry but by concentrating on income tax rates you are ignoring the rise in indirect taxation ( eg raising VAT from 8% to 15% in 1979 ) which affected you.

No because VAT is more under my control. Many items are exempt or avoidable. Or I save rather than spend, or spend overseas.

I could not have possibly achieved the net worth that I now have under the pre-Thatcher regime of sky-high marginal income tax rates. So instead I would have emigrated, as many others did during the tax-driven "brain drain" of the 60s and 70s.

ursaminortaur
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Re: Inflation

#635325

Postby ursaminortaur » December 20th, 2023, 2:50 pm

Lootman wrote:
ursaminortaur wrote:Sorry but by concentrating on income tax rates you are ignoring the rise in indirect taxation ( eg raising VAT from 8% to 15% in 1979 ) which affected you.

No because VAT is more under my control. Many items are exempt or avoidable. Or I save rather than spend, or spend overseas.

I could not have possibly achieved the net worth that I now have under the pre-Thatcher regime of sky-high marginal income tax rates. So instead I would have emigrated, as many others did during the tax-driven "brain drain" of the 60s and 70s.


Except other countries also had high income tax rates including the USA before Reagan.

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Re: Inflation

#635327

Postby Lootman » December 20th, 2023, 2:57 pm

ursaminortaur wrote:
Lootman wrote:No because VAT is more under my control. Many items are exempt or avoidable. Or I save rather than spend, or spend overseas.

I could not have possibly achieved the net worth that I now have under the pre-Thatcher regime of sky-high marginal income tax rates. So instead I would have emigrated, as many others did during the tax-driven "brain drain" of the 60s and 70s.

Except other countries also had high income tax rates including the USA before Reagan.

But generally not as high as in the UK.

And at least in the US at that time you could deduct a lot of things for tax purposes, such as sales tax, property/council tax and even gambling losses!

And wages were higher in the US, Canada, Australia etc. I had various older members of my family who emigrated to all three.

There is no way around it: pre-Thatcher taxes were far too high and it was ruining the prosperity of the UK.

ursaminortaur
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Re: Inflation

#635339

Postby ursaminortaur » December 20th, 2023, 3:49 pm

Lootman wrote:
ursaminortaur wrote:Except other countries also had high income tax rates including the USA before Reagan.

But generally not as high as in the UK.

And at least in the US at that time you could deduct a lot of things for tax purposes, such as sales tax, property/council tax and even gambling losses!

And wages were higher in the US, Canada, Australia etc. I had various older members of my family who emigrated to all three.

There is no way around it: pre-Thatcher taxes were far too high and it was ruining the prosperity of the UK.


I agree that income tax rates were sub-optimal (above the point in the laffer curve where tax revenue would be maximised). However your concentration on the top rates of income tax distorts the taxation picture as only a relatively small part of the population was affected by them. The total tax burden as a percentage of GDP (which includes both direct and indirect taxes) provides a better picture.


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