Ask HN: What Is Happening in the UK? • Hacker News Board

Re: Ask HN: What Is Happening in the UK?

#181

Post by hunglee2 » Thu, Sep 29, 2022, 5:06 PM UTC

MattPalmer1086 wrote: post #179

hunglee2 wrote: post #24

In simple terms, the Bank of England and UK Gov are pursuing conflicting economic policies, BoE trying to take money out of circulation through hiking up interest rates, whilst UK Gov is putting money into circulation by proposing massive debt funded tax cuts. The obvious incoherency of this then led to the markets losing confidence in the UK economy, crashing the value of the pound, which in turn makes the planned U…

They also avoided costing any of it, and had no analysis by the Office of Budget Responsibility. Since they called it a "fiscal event" rather than a budget. This avoidance of accountability is a repeated pattern in British politics recently. Turns out you can bend our political system that way, but the global markets really don't appreciate that behaviour. One economist said that Britain is now paying the Moron Risk…

yes, incredible. Now UK is waiting for OBR to conduct this analysis in November, not only classic cart-before-horse but punitively long period of uncertainty which will be sure to bleed what remaining confidence there is the UK economy

Re: Ask HN: What Is Happening in the UK?

#182

Post by MattPalmer1086 » Thu, Sep 29, 2022, 5:13 PM UTC

wave_function wrote: post #149

tikkabhuna wrote: post #87

Earlier quoted context omitted.

Between £100k and £125k your personal allowance is reduced to £0, so for every £1 you gain, you lose more of that allowance and that works out to a 20% reduction. That on top of the 40% rate equals 60%.

If I’m understanding correctly, that makes the effective marginal tax rate between 100k and 125k higher than after 125k? Feels kind of crazy

That's correct.

Most people in the UK have no idea that there is an effective 60% tax rate either. It's not an official tax band.

But it's the kind of tax raising governments love doing, by stealth. Don't put up the tax band thresholds causing more people to fall into the higher bands over time. They also remove child tax credit as you earn more. And remove your personal tax allowance gradually over 100k.

Re: Ask HN: What Is Happening in the UK?

#183

Post by origin_path » Thu, Sep 29, 2022, 5:35 PM UTC

rvieira wrote: post #170

Brakenshire wrote: post #75

Earlier quoted context omitted.

Yes, at a moment of inflation, they announce significant tax cuts which will have a big inflationary impact. The Bank of England was already behind on interest rate rises, and now the government is relying on them to not only counter global trends (high rates in the US causing devaluations basically everywhere), and also the inflationary effect of energy cost increases, but also extra inflationary tax cuts. That will…

(Not an economist by any measure) Can you explain "tax cuts which will have a big inflationary impact". The 20% bracket went down to 19%. The 45% bracket disappeared (now included in the 40%) which is only for £150k+ earners, which is a tiny minority in the UK. I don't think the actual numbers move inflation. Isn't it more the conflicting policies (BoE and gov) in theory and the perception of them not being in the sa…

Yeah, the idea it's the tax cut isn't correct. That's not even a big tax cut. It's the energy price cap that utterly dominates. The left will insist otherwise because they hate tax cuts and love price controls, but that doesn't make it accurate.

Re: Ask HN: What Is Happening in the UK?

#184

Post by alkonaut » Thu, Sep 29, 2022, 5:45 PM UTC

hunglee2 wrote: post #180

alkonaut wrote: post #178

Earlier quoted context omitted.

Isn’t the simple option to simply reverse policies and do whatever returns confidence? No debt funded tax cuts, reduce excessive energy subsidies and so on? Sure it might be disastrous for Truss, or Government, or The Conservative party. But for the UK as a whole it must be the reasonable way out?

this is probably what is going to happen - actually the least worst option. However, such a reversal will not fully restore confidence as any U-turn will not come at political cost to Truss / Kwarteng but also to UK Gov / Conservative party leadership as a whole - it would be admitting that they don't know what they are doing. There will be an economic price for that also

I hope they recognize that’s what’s what will happen eventually, and change course sooner rather than later.

Re: Ask HN: What Is Happening in the UK?

#185

Post by olddustytrail » Thu, Sep 29, 2022, 6:06 PM UTC

colinmhayes wrote: post #174

IshKebab wrote: post #158

Earlier quoted context omitted.

They could have funded it by windfall taxes rather than borrowing.

No they couldn't have. The electricity companies aren't really making more money than normal, they're paying insane rates to import fossil fuels.

Yes, they really could. We're not talking about your energy supplier company, we're talking about electricity producers and fuel suppliers (oil and gas companies). Different set of companies and they are indeed raking it in.

Re: Ask HN: What Is Happening in the UK?

#186

Post by dan-robertson » Thu, Sep 29, 2022, 6:33 PM UTC

MattPalmer1086 wrote: post #182

wave_function wrote: post #149

Earlier quoted context omitted.

If I’m understanding correctly, that makes the effective marginal tax rate between 100k and 125k higher than after 125k? Feels kind of crazy

That's correct. Most people in the UK have no idea that there is an effective 60% tax rate either. It's not an official tax band. But it's the kind of tax raising governments love doing, by stealth. Don't put up the tax band thresholds causing more people to fall into the higher bands over time. They also remove child tax credit as you earn more. And remove your personal tax allowance gradually over 100k.

> And remove your personal tax allowance gradually over 100k.

Well the that’s the thing this thread is all about so that isn’t an additional thing.

Re: Ask HN: What Is Happening in the UK?

#187

Post by atmosx » Thu, Sep 29, 2022, 6:42 PM UTC

cbeach wrote: post #10

bscphil wrote: post #7

Earlier quoted context omitted.

> For that reason I chose to quit my job as a software team manager in an investment bank and instead went to work as a developer in a startup. > I decided there’s no point in working long hours in a responsible job helping other people advance their careers if I keep less than 40p of every pound I earn at that point. I may as well do less responsible work that I enjoy instead. This is an extremely funny takeaway in…

Oh yes, you're not wrong. Many people on the left see tax as an appropriate punishment for wealth. In their worldview, wealthy people are demonised and dehumanised. The left are convinced that wealthy people are parasitic on society. This leftwing ideology seems peculiar to me, having seen the data on who's funding public services, and who's benefiting from public services.

Gavin Belson agrees: https://www.youtube.com/watch?v=t5zQpN28xa4

Re: Ask HN: What Is Happening in the UK?

#188

Post by atmosx » Thu, Sep 29, 2022, 6:47 PM UTC

cbeach wrote: post #163

mvc wrote: post #59

Earlier quoted context omitted.

It's not a punishment for wealth. Think of it like insurance of your status in the system. Your insurance premiums are proportional to the value of the stuff you want to protect. Presumably you own a house. A pension. Various other investments perhaps. All these become worthless if civil society fails and we go back to the Leviathan. It is right that you should pay a higher premium for that type of insurance than tho…

I'm not sure I get any more value from the public service than anyone else. Do I get faster service from the police? More officers assigned to protect me? Any perks from the NHS for the wealthy? Or the same service as everyone else? One thing I know for sure - less public money is allocated to my children (I live in the countryside) than children in urban areas, due to the funding formula.

> I'm not sure I get any more value from the public service than anyone else.

"Clash of Autonomy and Interdependence" is an interesting somewhat related read on the topic[^1].

[^1]: https://economistsview.typepad.com/economistsview/2009/10/cl...

Re: Ask HN: What Is Happening in the UK?

#189

Post by jbm » Thu, Sep 29, 2022, 6:52 PM UTC

colinmhayes wrote: post #176

hgdfhgfdfds wrote: post #142

Earlier quoted context omitted.

"This idea is utterly discredited in economic circles." I'm an economist and this is wrong. I usually see this line on on Reddit and not from any journal.

Here you go https://www.igmchicago.org/surveys/tax-reform-2/

I was looking at that and it seems to be more of an opinion survey of university professors of economics about a bill that had trickled-down as a part of it, rather than a formal journal entry.

> Tax policy appears to have little effect at the margin on GDP growth in OECD countries.

This idea did come up repeatedly though, so I assume it is a common-enough belief in economic circles.

Re: Ask HN: What Is Happening in the UK?

#190

Post by UglyToad » Thu, Sep 29, 2022, 6:54 PM UTC

tomxor wrote: post #36

thewarrior wrote: post #16

The UK imports large amounts of energy and other things essential to its prosperity. The UK has a current account deficit which means it does not have enough of the dollar to cover for its imports. It has solved this problem over the years by borrowing and becoming a haven for investment to cover up the shortfall. Now we have a bat shit government that says we need to lower taxes and borrow a boat load of money to ti…

> One way to stop this is to raise interest rates and pull pounds out of circulation but the government is terrified of popping the real estate bubble. I'm pretty sure i'm being naive here but... why? House ownership has become a huge problem for recent generations in the UK, I still haven't engaged with the market because it's so hard to get a foot in the door unless you have masses of disposable income. Popping the…

Not so much "the rich" as the vast majority of voters and a large section of the population. From "Rethinking the economics of land and housing":

> One important effect has been on the interests and aspirations of the electorate: the last thirty years have witnessed an expansion in the number of voters who have a vested interest in the buoyancy of the housing market, and a marked decline in the constituency of voters with an interest in social housing

> This has triggered a shift in political attitudes on issues of housing and resulted in a much greater focus on meeting homeowners’ aspirations. Overall these factors represent a profound shift in the way that land and property has been perceived in British society.

> Whereas 100 years ago houses were mostly regarded as simply somewhere to live, today homeownership is promoted as an investment opportunity which offers long-term financial security in the face of stagnating wages, dwindling pensions and reduced state welfare provision. To politicians and much of the general public alike, houses are no longer perceived as universal consumption goods but rather as vehicles for accumulating wealth.

> Homeownership has become perceived by many as ‘the essential step to obtain membership of an expanding middle class for whom housing equity was pivotal in a broader lifestyle of credit based and housing equity fuelled consumption’ (Forrest et al., 1999). [...] underpinning this has been a deregulation and liberalisation of the financial sector and a rapid increase in income and wealth inequalities.

> This marks the final major shift in land’s economic significance, as high levels of owner-occupation, a deregulated housing finance system and growing inequalities have combined to create a system of ‘residential capitalism’ (Schwartz and Seabrooke, 2008). In turn, the political dominance of homeowners – both in national elections and in local planning decisions – has ensured that their interests have been protected and subsidised by government policy (Keohane and Broughton, 2013).

For the avoidance of doubt, I don't think this is a desirable or sustainable situation. I just thought it was helpful to expand on the contributing factors.