Dave's Plan?

[observer]

Quite a brave speech from Osborne, telling us that we're (or some of us are) in for more austerity in order to remove the deficit and secure a balanced budget. So more cuts in welfare, which to a point may be no bad thing. Then, Dave tells us that (by definition) the rich are to get tax cuts, surely this will make it more difficult to "pay of the deficit"?  OK, the poorly paid will be taken out of tax altogether, but aren't they the "working poor", currently in receipt of tax credits, which are going to be cut? Another query -  noticed a commitment to scrap HR legislation, which presumably means UK HR legislation, as under EU treaty, we can't leave the ECHR treaty and remain in the EU. Presumably the ECHR legislation will still apply and it's court can be appealed to, over the heads of UK courts - so what's the point?

[inky pete]

Raising the basic rate tax threshold will cost over £5billion, raising the higher rate threshold £1billion. So 5 times as much being given to low earners in tax cuts as is being given to middle or high earners (who already pay the vast majority of the total income tax paid).

 

Personally, I don't agree with the idea of "removing low paid people from the tax system". I believe that in order to participate in society it is important that EVERYONE pays some portion of the most visible tax which pays for that society. Obviously, low earners should pay less than high earners but I don't believe that granting a block total exemption encourages social cohesion.

[observer]

Not quite my point Inky; if the tax reduction will cost £6billion, that's £6billion less to pay off the deficit. I tend to agree with the rest of your point though; but we've reached a stage where some jobs are so low paid or part time, that Govs have felt obliged to supplement earnings with benefits (tax credits). Meanwhile, while we're exercising "austerity", our EU neighbour across the channel, seems to still be accumulating debt (over a $trillion I believe).

[Davy51]

Didn't we have debts of £trillions at the end of the last Labour government ? Has that been airbrushed out of the picture ?

 

As for low pay & benefits, you can't always blame the recipients for their plight considering that successive governments have been happy to allow employers to exploit the fact that employees can get their wages made up by claiming benefits. Although we may dislike the culture of benefit dependency, i for one would prefer to know that my brothers & sisters in need are taken care of in a manner that also gives them dignity & money to plough back into the economy & keeps them from being reduced to begging or crime.

[inky pete]

This just goes to show that all of the in-work benefits which supplement a low earning workers pay - tax credits, housing benefit and a number of others - are in reality nothing more than a government subsidy to businesses and employers.

 

They allow businesses to employ people and benefit from the fruits of their labour at far lower cost than paying a decent wage which would allow workers to then pay their own way in the world. The introduction of the minimum wage has been instrumental in this since it has set a de facto standard pay rate for all low paid jobs. There is no longer ANY pay variation between low paying employers and no need for companies to compete with eachother in the labour market and pay higher rates to attract and retain the people they need.

 

Pay at the lower end of the scale has become, in effect, a government sponsored cartel.

[observer]

Not sure about "Gov debt" Dave, but personal debt within the population certainly reached the £trillion mark, and even though the banks have cut down on lending, it seems folk are still living off their credit cards or worse, seeking pay day loans. But the Tory idea of erasing the deficit is sound in principle, the Germans have run a balanced budget for decades, which no doubt allows them to fund the lame ducks in the EU.  The political argument imo, is how to get there; whilst it does require a reappraisal of Gov spending; I fear it doesn't address fiscal inequalities and the growing wealth gap - after all, George did say "we're all in it together", which suggests that the broadest shoulders bare the biggest share of the burden.

[inky pete]

The figures for personal debt include mortgages - in fact the vast majority of it is made up of mortgages. But don't include the value of the assets they are secured against.

 

This begs the question of whether a £100,000 mortgage on a house worth £250,000 is really a debt at all?

 

No other country in Europe - certainly not Germany - has anything like the number of home owners we do. So no other country in Europe has a personal "debt" figure anything like as high as ours.

[Davy51]

Unfortunately ,our present economy is based on a cycle of credit & debt & while bills are being paid the plan is producing some very wealthy city types..On the other hand, however, Wonga have announced that, due to attention from the bad publicity generated by the whole pay day loan industry, & the inability of many customers to repay loans they are writing off 300,000 bad debts which is almost a third of their customer base.

[inky pete]

Hardly fair to equate a high interest payday loan with a well planned and affordable mortgage based on a valuable asset which will provide the homeowner with a rent free retirement once it is paid off.

[Davy51]

Correct Inky ,but some people have gone down that road out of necessity....either them or loan shark ,but there is probably little to choose between the two. A major problem is that a lot of people are up to their eyes in debt & one of the biggest outgoings is monthly rent for people not on the property ladder already & this rent is preventing many people saving deposits to buy. Credit is great for getting the things you need if you can afford the repayments, but it doesn't take much of a disruption for that to turn into a mountain of debt.

 

Incidentally,Wonga will be writing off about £220 million .

[inky pete]

Incidentally,Wonga will be writing off about £220 million .

 

 

So less than 1 quarter of 1 tenth of 1 percent of the £1trillion quoted as personal debt. Hardly a huge proportion.

 

For clarity's sake, the same proportion of the 60 million or so total population of the UK would be fewer people than live a medium sized village.

[Davy51]

You know though Inky, weren't they bandying £trillion figures about when the Tories came into power ?

[observer]

Don't think we can write off all personal debt to mortgages; although such lending to folk who had no chance of repayment in a world of insecure employment sparked off "the crash".  But we have a generation of Uni students who start off with £9,000 debt; and in a world of " I want it, I want it now"; credit card debt is part of the culture.

[inky pete]

Any figure is meaningless without context.

 

Of the "£1trillion of personal debt" phrase which gets bandied about to illustrate some sort of national shame or crisis:-

 

There's about £850billion in UK mortgages in total, around 37% of households have a mortgage, and the median outstanding balance is around £75,000 (as against an average UK property value of around £250,000) which gives a monthly mortgage repayment of £350-£400 at current rates - not bad value for putting a roof over your family's heads.

 

Another £50 to £70billion is accounted for by bank persoanl loans, which include home improvment loans, car finance agreements, and things like furniture bought on credit terms (often at 0% interest).

 

A further £100billion is loans owed to the Student Loans Company.

 

Total credit card debt at any one time is around about £50billion, but this includes all the people who pay for things on credit cards and then clear the balance each month and so pay no interest.

 

I do this myself, I buy almost EVERYTHING on a credit card, get protection from the consumer credit act in case of problems with a business or supplier, collect the loyalty points or cashback offered by the card provider, then pay the card balance off every month. I also have another card which I use solely for business expenses, hotels and meals when working away, flights, fuel for business mileage, etc. - all of which gets claimed back from my employer and paid straight off. So depending when in the month and which month we're talking about I could have well over five thousand pounds of "debt" on my credit cards, but it isn't really personal debt because I either already have the money and am just using the card for convenience or other advantage, or it's business expenses which I'll be reimbursed for as soon as I submit my receipts.

 

So where are we up to? 850+50+100+50 = 1050. Oh look, we're already well over the £1trillion which is quoted as a bad thing and we've only counted normal, everyday, responsible lending and borrowing.

[observer]

Perhaps the key word is "responsible"; which clearly isn't or hasn't been the case; hence the financial crash. And now. financial caution by lenders and job insecurity for would be borrowers, makes mortgages a thing of the past for the young generation. Meanwhile, using one credit card to pay off another etc; and desperately resorting to pay day loans is the current culture.

[inky pete]

There's no irresponible lending without irresponsible borrowers, I think it's time people stopped exclusively blaming the banks for making the loans and focus some of the spotlight on the borrowers who knowingly bit off more than they could ever possibly chew.

 

Your second sentence shows just how far out of touch you are.

 

Financial caution by lenders? A good thing surely! And before you bleat on about young people not being able to buy because they can only get a 75% mortgage just bear in mind that Help to Buy will chip in 20% so they only have to find a 5% cash deposit - thats just £4000 on an £80000 house or flat. If a young couple save just £20 a week each they'll have that inside 2 years - without any help which may come from family.

 

Job insecurity? In case you hadn't noticed we now have just about the lowest unemployment rate in the western world, lower than before the recession and with a significantly larger population to boot meaning that more people are in work in the UK now than EVER before.

 

Mortgages a thing of the past for the young generation? The number of first time buyer completions was over 7% higher in August this year than it had been a year previously. House prices are rising slowly almost everywhere - which proves that people CAN afford to buy and CAN get the mortgages necessary.

 

There will always be a feckless few who can't manage their own finances or have champagne tastes on beer money and dig themselves into a financial hole, but they are not a new thing - they've always been with us.

[observer]

Irresponsible lending was at the heart of the crash; leaving banks with huge amounts of toxic debt, to be picked up by the lender of last resort - us.  Financial caution by lenders, by definition (based on my criticism) a good thing, that should have applied itself throughout - but didn't - hence the crash. As for the employment scene - suggest tis you who are "out of touch"; there's no longer such a thing as "a job for life", with a wage that can be counted on to easily pay off a mortgage (many haven't had a wage increase for years, and certainly not one in line with price inflation) - hence the surge in renting, at increasing rates btw. As for the "help to buy scheme", this merely increases demand and contributes to price inflation; when what's required is demand reduction by providing more housing at affordable rents. There's a clue to the state of the nation in the fact that to date, the more sleazy money lenders have flourished.

[inky pete]

Your right, the "job for life" is dead. HURRAH!!!!

 

Now it is the norm for the younger generation to move employers, get promoted, and get ahead on merit without the load of time-serving old clock watchers who used to clog up all the higher level Leading Hand, Foreman and Supervisor positions purely based on the number of years they've been there.

 

If rents are increasing (and they are, but only slowly) that's because people can AFFORD more, and since benefits have been more or less frozen for some time, that's because they are EARNING more.

 

Get your head out of your permanent doom and gloom cloud, after ten years of Labour political correctness and economic bungling things are finally IMPROVING!

[Davy51]

I think it is fair to say that the unemployment figures have been reduced significantly by changing the qualifying rules for benefit. I took early retirement partly due to poor health  nearly 3 years ago & at the time was able to take advantage of a redundancy package & also i started to receive my company pension that i had paid into for years.I still have 18 months to go before i can claim my State Pension ,but because i am in receipt of a private pension i can't claim a penny in benefits & therefore i am not on the unemployment figures. There must be a lot of people in Britain in the same situation & who are contributing to lower unemployment figures.

[inky pete]

The number of people IN WORK is at an all time high.

 

Even the IMF has stated that the UK economy is in better shape and has better prospects than that of any other industrialised nation in the world - and it must have REALLY hurt Christine Lagarde to admit it after the criticism she and her predecessor levelled at the recovery plan.

[observer]

  After that piece of fantasy Ink; you've just got to be a fully paid up member of the Tory Party.  Just in case it's not visible from your bubble; most State employees haven't had a pay rise since the Tories took over, meanwhile prices have gone up - I'd call that legalised theft by Gov. As for all these jobs, of course we've opened the door to every fly by night entrepreneur to employ youngsters on zero hour contracts, with menial low paid jobs, that require a tax subsidy from Gov and with no idea how long they'll have the job - so forget any ability to pay off a mortgage. Basically a form of social anarchy that Dickens would easily recognise. btw before you try to quote Liebor, they're just as bad, but not quite; they'll borrow us out of this anarchy.

[Davy51]

But a lot of these people who are in work are doing 20 hours a week & topping up with tax credits  ,so one vacancy is creating 2 jobs & working wonders for the jobless figures. There was a time when employment was plentiful that people were working lots of overtime & 60 hour weeks were the norm ,but a fact of life is that proper full time work is not as readily available these days .

[observer]

They're simply not proper jobs, and certainly not jobs that can sustain financially or in secure employment terms, a lifetime mortgage commitment.

[inky pete]

But a lot of these people who are in work are doing 20 hours a week

 

The totals for people in work are quoted as full time equivalents - so 2 people each working 20 hours a week will only count as 1 person on the figures.

 

And there are plenty of "proper jobs" being created, the company I've recently left is increasing the size of it's engineering team in this area by around 20% - that's 6 jobs paying in excess of £30K plus car and pension. The company I've recently joined have vacancies for 3 permanent employee apprentices in this area with salaries that will rise to above £20K on completion of a 2 year apprenticeship.

 

This is because most of the customers of both companies are increasing there own investment in new equipment and production capacity - and, of course, the staff to run them.

[Bazj]

Overtime is still very plentiful in this country.... go to any major building project on a Saturday or Sunday and you will see...

 

The problem comes when certain employers try and do what one did recently to my mates sister; change their contracts to include Saturdays and Sundays as normal working days and give time off in the week.... That way they get out of any additional weekend pay