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Ask HN: What Is Happening in the UK?

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

#21

Post by Nextgrid »

cbeach wrote: post #3

The pound is low against the dollar, as is the Euro low against the dollar. The pound dropped in value a few days ago, but the price has recovered since then. The media chooses to focus on the drop rather than the recovery, because the drop coincided with a government announcement of some pro-growth economic policies that mainstream pundits disagree with. If you speak to people in the U.K. many would agree that payin…

The problem I see is that these tax cuts only really help those who don't need the help, all while the lower classes still can't pay their energy bills/rent/food.

The issue is that most of the economy relies on people (including the lower classes) spending, which they aren't going to do if they already spent all their money on rent/bills. This in turn means businesses may go underwater if they aren't getting enough customers to stay afloat and operate profitably, leading to losses of jobs and less business for the companies that serve those businesses, and so on and so forth in a cascading failure. So even if you are selfish and say "fuck the poor", it's a bad idea because your ability to stay rich relies on there being "poor" people who spend their money at your establishment. Not to mention that with extreme poverty comes crime, something that ultimately costs all of us money.

It's like "tricke-down economics", except it trickles up and unlike the former, this one actually does happen for real and we're already seeing the effects of it.

I say this as someone who otherwise is in favour of tax cuts and sees taxation as theft, but that's a discussion for another day. But if you're going to cut taxes to help with cost of living and can't cut them all, then focus your efforts where it actually helps. The ones who will actually see a non-trivial increase in their income due to this cut are those who already didn't need any help.

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

#23

Post by cbeach »

fnimick wrote: post #17
cbeach wrote: post #3

The pound is low against the dollar, as is the Euro low against the dollar. The pound dropped in value a few days ago, but the price has recovered since then. The media chooses to focus on the drop rather than the recovery, because the drop coincided with a government announcement of some pro-growth economic policies that mainstream pundits disagree with. If you speak to people in the U.K. many would agree that payin…

> the wealthiest 1% are paying 28% of income tax receipts - and this percentage has increased over the last decade Without any information on how wealth inequality has increased, and the 1% have more income and assets now than they did last decade, this is misleading at best. If the top 1% are paying more taxes but are also making more money, this hardly seems unfair.

So you think 1% of people shouldering 28% of the cost of public services is fair?

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

#24

Post by hunglee2 »

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 UK debt funded tax cut plan even more expensive than it already needed to, leading to even more loss of confidence.

We are now in cascading crisis, from which there are no good option, only worse and terrible ones.

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

#25

Post by smt88 »

icare_1er wrote: post #8

Genuine question: why are markets disapproving of the economics policy decided by a ... right-wing governement ? I though markets reacted negatively to socialist governments getting into power, not the opposite.

You're starting with an assumption that right-wing governments are good for economies. Let's ignore that dubious assumption and instead look at the actual policy.

Truss's administration is giving tax cuts to the wealthy and paying for it by borrowing. The markets know that trickle-down economics is nonsense and these tax cuts won't boost UK's economy enough to cover the enormous amount of debt required to pay for them.

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

#26

Post by rymate1234 »

cbeach wrote: post #3

The pound is low against the dollar, as is the Euro low against the dollar. The pound dropped in value a few days ago, but the price has recovered since then. The media chooses to focus on the drop rather than the recovery, because the drop coincided with a government announcement of some pro-growth economic policies that mainstream pundits disagree with. If you speak to people in the U.K. many would agree that payin…

> Due to the insidious tax policy of withdrawing the personal allowance when income reaches £100K

The affect of removing that doesn't seem to be that major, with the figures [1] appearing to work out at almost 1.5% less tax for those on £100k, and a little over 2.5% less tax for those on £200k -- hardly a huge decrease in the tax burden for those people.

[1]: https://blogsmedia.lse.ac.uk/blogs.dir/8/files/2022/09/28sep...

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

#27

Post by JonChesterfield »

Our government announced new economic policies that have been judged extremely harshly by everyone. The public perception of them is also severely negative which increases the risk of the alternative party gaining control next time around.

I really hoped the new leader would be the one with an economics background instead of the friendly optimist. Navigating out of brexit and covid is difficult and the leader sets the tone for how we're going to approach it.

The market deciding the UK is financially unsound seems a legitimate response to our strategy of copy the wise ostrich. Hopefully the people who chose Truss have made enough of a loss this week to reconsider their priorities.

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

#28

Post by caoilte »

un-costed tax cuts and an open ended promise to pay for the spike in energy prices spooked investors and caused a run on the pound and (worse) a collapse in the value of UK debt. This threatened to cause a run similar to the 2008 US mortgage backed securities crash because a lot of investors (including many if not most UK pension funds) used their UK debt as collatoral for more loans. If the price falls to far too fast they have to sell their UK debt at distressed prices to meet margin calls and this drives the price down further. The Bank of England has stepped in to prop up the market by printing more money (which means more inflation).

Interest rates are now expected to triple to 7% to cope with this fiscal event and as most UK home owners borrow money on revolving short term loans to buy houses many people are looking at a $1,000-$2,000 / month increase in interest payments and a 20% collapse in the value of property.

Most major businesses have gone into crisis mode (hiring freeze, paused expansion plans) which will have its own knock on consequences. If we're very very lucky it won't spread to other countries.

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

#29

Post by mattgperry »

cbeach wrote: post #3

The pound is low against the dollar, as is the Euro low against the dollar. The pound dropped in value a few days ago, but the price has recovered since then. The media chooses to focus on the drop rather than the recovery, because the drop coincided with a government announcement of some pro-growth economic policies that mainstream pundits disagree with. If you speak to people in the U.K. many would agree that payin…

Mainstream pundits like... Dan Hodges?

We're trying to boost the economy by cutting taxes on the group of people who are most likely just to stuff the extra money into investments rather than spending it? Great idea.

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

#30

Post by dan-robertson »

cbeach wrote: post #3

The pound is low against the dollar, as is the Euro low against the dollar. The pound dropped in value a few days ago, but the price has recovered since then. The media chooses to focus on the drop rather than the recovery, because the drop coincided with a government announcement of some pro-growth economic policies that mainstream pundits disagree with. If you speak to people in the U.K. many would agree that payin…

I don’t understand your logic? It sounds like you’re saying you changed jobs for less money so that your marginal tax rate would be lower even though your net income would be lower. In theory you could also change jobs to something that pays £125k where your marginal tax rate would be back down to 40%, though obviously you’d need to find such a job. You specifically wrote ‘marginal’ so I don’t think you’re confused between marginal and effective tax rates so are you suggesting that the 60p rate did not provide sufficient incentives for you to try to get paid more? That would maybe make sense but I think it can also be useful to think of pay raises on a logarithmic scale rather than a linear one (as in an equal amount of raise-worthiness would be expected to lead to a proportionally larger raise in absolute terms if your starting pay is higher), which would mean an x% raise at a higher marginal tax rate may still be worth it if your starting pay is higher. But then another common model is log utility for money which cancels out that effect.

It’s fair enough if you want to work at the startup but this seems like a strange rationalisation. I agree that the 60% marginal rate from the personal allowance reduction is kinda silly.

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