The Economy

[mick]

I think that we might have expected that we would be told that things were worse than we were told - aren't they always?

www.bbc.co.uk/news/articles/c724g07qwdwo

My question is, how does one plug a hole in revenue spending by cancelling capital projects?

Weren't we told that we should instigate projects because it was OK to borrow for capital, and it would boost the economy?

Mick

[JohnY]

It is only right to borrow for capital if the final return on the project is equal or greater than the total of the capital borrowed and the interest paid. Government does not normally get a direct return for projects but hopes to benefit from increased taxes due to an improved economy.

To your question. If some of the cost of projects was to be paid from government income rather than borrowing then that money could be diverted to help plug the hole in revenue spending.

I do not have a degree in economics.Ms Reeves has two.

[andy]

Not building new roads to generate more traffic is a jolly good idea anyway. If they spend billions increasing car dependency they end up spending billions more on the NHS to treat things like diabetes and obesity too.

[willien]

When I bought my house that would be considered a capital purchase. I funded the capital purchase from revenue by making monthly mortgage payments.

[mick]

Apropos some things!

Truss studied PPE and so should have known some economics. As a result I'm unimpressed by economics qualifications.
There was a discussion on LBC this morning on this very subject but my journey ended before I heard much. Some were as puzzled as I am.

If one borrows, or would have used the money to make profit elsewhere, it's usual to treat 'interest payments' on capital projects as being capital. Consult a proper accountant for chapter and verse. Here's a relevant quote. "Capitalized interest refers to accrued interest on an asset or loan that is not immediately reported on the company's income statement as an expense like other interests."

When Starmer and co were in opposition they banged on about borrowing for infrastructure projects in order to boost the economy so I don't get the logic of cancelling infrastructure projects.

I can't help thinking that they are setting the scene for autumn tax rises.

Mick

[zx9]

Jul 29, 2024 9:03:25 GMT JohnY said:

.....

I do not have a degree in economics.Ms Reeves has two.

Mrs. ZX9 has a degree in economics, she says it is all a load of tripe (*) but it did not stop her working for an international bank or in local government finance.

* Real world is not a closed system and people don't behave rationally.

[willien]

Accountants treat outgoings (and everything else for that matter) in the way they can legally gain the best deal for their client - particularly re tax due.

[spinno]

At the end of the day ordinary Joe and Josephine are well and truly stuffed

[mick]

Jul 29, 2024 12:03:29 GMT willien said:

Accountants treat outgoings (and everything else for that matter) in the way they can legally gain the best deal for their client - particularly re tax due.

Of course they do - it's their job (or at least part of it). Would you pay a plumber who worsened the leak or a car mechanic that made the noise louder?

Now to take my life in my hands!!!

Sunak was right. He was right when he warned us about Truss and he appears to be right about the new government raising taxes. I’m guessing that most of us on this forum are £200 worse off this morning. 

Of course it will be said that he was right about taxes because he knew about the black hole and the incomers didn't and there's maybe some truth in that. Incomers always say that the outgoers left more of a mess than the incomers anticipated but it seems to be being taken to new heights this time. Maybe there's some truth this time.

Finally DON'T interpret this post as being pro Tory - I'm very glad they are gone and voted for them to go.

Mick

PS I learned something today. Apparently, the OBR have been legally obliged to accept the numbers being given to them by the government. The Chancellor is said to be changing that and making the OBR properly independent. If she does nothing else that's a good thing.

[dreampolice]

Jul 30, 2024 8:00:53 GMT mick said:

Jul 29, 2024 12:03:29 GMT willien said:

Accountants treat outgoings (and everything else for that matter) in the way they can legally gain the best deal for their client - particularly re tax due.

Of course they do - it's their job (or at least part of it). Would you pay a plumber who worsened the leak or a car mechanic that made the noise louder?

Now to take my life in my hands!!!

Sunak was right. He was right when he warned us about Truss and he appears to be right about the new government raising taxes. I’m guessing that most of us on this forum are £200 worse off this morning. 

Of course it will be said that he was right about taxes because he knew about the black hole and the incomers didn't and there's maybe some truth in that. Incomers always say that the outgoers left more of a mess than the incomers anticipated but it seems to be being taken to new heights this time. Maybe there's some truth this time.

Finally DON'T interpret this post as being pro Tory - I'm very glad they are gone and voted for them to go.

Mick

I’m a few years off from being a pensioner admittedly, but with mine and my wife’s pensions and then with our state pensions we certainly won’t be poor. I wouldn’t expect to have a winter fuel allowance, so I see no wrong in means testing it as there will be some who clearly need it. It’s the same when they changed the rules for child benefit, which was based on income. We lost out because of that but I accepted it because we could afford it. I also accept it is a bugger when you lose something that you are used to.

[mick]

Jul 30, 2024 8:11:44 GMT dreampolice said:

Jul 30, 2024 8:00:53 GMT mick said:

Of course they do - it's their job (or at least part of it). Would you pay a plumber who worsened the leak or a car mechanic that made the noise louder?

Now to take my life in my hands!!!

Sunak was right. He was right when he warned us about Truss and he appears to be right about the new government raising taxes. I’m guessing that most of us on this forum are £200 worse off this morning. 

Of course it will be said that he was right about taxes because he knew about the black hole and the incomers didn't and there's maybe some truth in that. Incomers always say that the outgoers left more of a mess than the incomers anticipated but it seems to be being taken to new heights this time. Maybe there's some truth this time.

Finally DON'T interpret this post as being pro Tory - I'm very glad they are gone and voted for them to go.

Mick

I’m a few years off from being a pensioner admittedly, but with mine and my wife’s pensions and then with our state pensions we certainly won’t be poor. I wouldn’t expect to have a winter fuel allowance, so I see no wrong in means testing it. It’s the same when they changed the rules for child benefit, which was based on income. We lost out because of that but I accepted it because we could afford it. I also accept it is a bugger when you lose something that you are used to.

Actually I agree with you. I always thought that the winter fuel payment should, effectively, be means tested. I was making the point that 'creeping tax rises' have begun and won't stop!

I'm in a good position in that I don't need means tested benefits but not so well off that I can shrug off the loss of a couple of hundred, especially when I think that there's more that I'll lose!

Mick

[geoffr]

Jul 30, 2024 8:22:07 GMT mick said:

Jul 30, 2024 8:11:44 GMT dreampolice said:

I’m a few years off from being a pensioner admittedly, but with mine and my wife’s pensions and then with our state pensions we certainly won’t be poor. I wouldn’t expect to have a winter fuel allowance, so I see no wrong in means testing it. It’s the same when they changed the rules for child benefit, which was based on income. We lost out because of that but I accepted it because we could afford it. I also accept it is a bugger when you lose something that you are used to.

Actually I agree with you. I always thought that the winter fuel payment should, effectively, be means tested. I was making the point that 'creeping tax rises' have begun and won't stop!

I'm in a good position in that I don't need means tested benefits but not so well off that I can shrug off the loss of a couple of hundred, especially when I think that there's more that I'll lose!

Mick

I was surprised to receive a cheque for the winter fuel payment last winter. I had been under the impression that it was already means tested. I have no problem with it being withdrawn from those who don’t need it.

[davem399]

Jul 30, 2024 8:43:18 GMT geoffr said:

Jul 30, 2024 8:22:07 GMT mick said:

Actually I agree with you. I always thought that the winter fuel payment should, effectively, be means tested. I was making the point that 'creeping tax rises' have begun and won't stop!

I'm in a good position in that I don't need means tested benefits but not so well off that I can shrug off the loss of a couple of hundred, especially when I think that there's more that I'll lose!

Mick

I was surprised to receive a cheque for the winter fuel payment last winter. I had been under the impression that it was already means tested. I have no problem with it being withdrawn from those who don’t need it.

I am fortunate in that loss of the winter fuel payment won’t have me visiting the food bank.  In fact, we had a new efficient boiler fitted this winter, replacing a 40 year old one, so should save the £200 in cheaper gas bills, apart from the capital cost of the replacement.

[MJB]

Sometimes the cost of administrating means testing outweighs the cost of making a benefit universal.

I've never understood why people are obsessed with tax cuts. They're usually the same people who moan about the standard of education, healthcare, etc.. If you want good public services and infrastructure you have to have a fair taxation system. Unfortunately we target the needy with cuts to their income, so those that can afford it get bribed with tax cuts.

[JohnY]

Jul 30, 2024 9:36:46 GMT MJB said:

Sometimes the cost of administrating means testing outweighs the cost of making a benefit universal.

I've never understood why people are obsessed with tax cuts. They're usually the same people who moan about the standard of education, healthcare, etc.. If you want good public services and infrastructure you have to have a fair taxation system. Unfortunately we target the needy with cuts to their income, so those that can afford it get bribed with tax cuts.

Crude means testing often causes unfair 'cliff edges'(child benefit being a bad example of that) and good means testing quickly gets complicated and expensive. More civil servants are needed to do it and there is scope for fraud or accidental error. The simplest and fairest system is not to means test but make all benefits taxable, as state pension is now. HMRC already know about earnings, pensions, and interest from British savings accounts; they could be aware of benefits. In most cases tax is collected by PAYE which sort of works and has done so for many years. Income from other sources would, as now, require tax assessment forms to be filled in.