The Budget

Ilovecheese

I am puzzled about spending cuts and austerity. According to what I have read, the spending cuts are mainly being delayed for a couple of years, with the suggestion that this is because by then Labour will have won the election and the unpopularity for imposing the cuts will fall on them instead of the Tories.
But surely the cuts and austerity are a political choice and Labour would only need to impose them if they choose to. Am I misunderstanding?

It's very odd, isn't it Ilovecheese.

Economists and political geeks tell us the deficit is a political device, not an economic one. The deficit is not a deficit we would consider an unpaid household bill. For governments, debt is a product of their fiscal rules. That doesn't mean they can print money whenever they want. The government's fiscal rules have to be acceptable to the market.

However, governments can change the fiscal rules. They can do this to make the deficit larger (why would they?). Or to make it smaller, or they could make it go away completely.

Hunt has made changes to the fiscal rules. He said that underlying debt had to fall as a proportion of GDP at the end of a five-year rolling period. Previously, it was a three-year period which meant reducing it quicker and within a parliament. But, as I understand (the experts knew) is that each year you start another five-year rolling period that rolls on, possibly forever but certainly into the next parliament.

Happy to hear if I have got this wrong. I have been trying to get my head around it. So typed it up as much for my learning as anything.

That's what I was thinking, surely this deficit hole doesn't have to be filled at all, it is a choice.
Thank you for your replies Whitewavemark2 * hugshelp* and MaisieD
Sometimes I read things in the press, and they sound so certain about what they say, I tend to feel it must be me that is wrong.

MaizieD the black hole in the U.K. finances along with the national debt story is perpetuated by all political parties and news outlets, political commentators and discussion programmes.

It obviously suits all agendas to continue to do so.

But the cost of them is built into the Tories budget. So if Labour cancel them they then have a deficit hole to fill. The Tories are are also deferring a lot of energy costs, not really fixing the problem. All to be dumped on Labour so that whatever Labour do it will look bad.

The thing is, 'hugshelp', that there isn't really any 'hole' in the country's finances. About a third of the so called 'debt' is money that was created by the Bank of England over the past 12 years to either put money into the economy (after the Global Financial Crisis and for covid) or to prop up the pound (when it dropped after the Brexit vote). As the BoE did this on behalf of the government, by order of the government, and the BoE belongs to the state, it isn't 'owed' to anyone. The country's finances are not like those of a household or a company, it cannot run out of money because it can always create more. It doesn't need our taxes to pay for things. Taxation has other functions, but it is not to make money to pay for government spending.

The rest of the 'debt' is government bonds and savings accounts. They have been using bonds for funding for hundreds of years. People like them because they are a guaranteed investment and a safe place to put their savings. Pension funds have £millions (if not £billions) invested in government bonds. If you have premium bonds they are a 'loan' to the government. Would you want them paid back?

All this budget will do is make most people poorer, so they won't have spare money to spend. This will mean businesses failing for lack of customers and make new or existing businesses very reluctant to invest in an economy where there is no spare money. So no growth (which is what the OBR has forecast- no growth for the next couple of years.

To make matters worse, the BoE has been raising interest rates, supposedly to control inflation, but it cannot control the sort of inflation we are experiencing because it comes from external causes which are beyond our control.

What the government should be doing is putting much more money into the economy to fund public services and improve our infrastructure. Not to mention investing in 'greening' (insulating our old and draughty housing stock and investing in renewable energy production) which would create jobs and income for businesses.

This is not a novel idea. It's Keynesian economics. Spend your way out of a recession. Austerity is a mad, bad and irrational economic theory; one which even the IMF says goes too far. It didn't work under the Cameron government, it isn't any more likely to work now.

There are plenty of economists who would tell you that what the government is doing is wrong...

Pammie1

growstuff

No, I haven't applied because Macmillan Cancer did a detailed benefit check for me. I've also looked myself at the online benefit checkers. I know I'm not eligible for anything else.

Slightly off topic, but can I recommend that people seeking benefits advice from advisers connected to charitable organisations, check the information that they are given before acting on it - particularly when dealing with PIP.

I worked in benefits and in the last couple of years have had a number of friends newly diagnosed with various conditions ask me to check information as their advisers don’t seem to understand the rules surrounding PIP - particularly after retirement age.

New claims for PIP/AA and DLA for children can all be fast tracked for an enhanced rate award of care component and mobility award as appropriate, in the event of a terminal diagnosis (claimant not expected to live more than 6 months at present, but under review to extend to 12 months). Existing claims for lower awards can be fast tracked in the same way for enhanced care and the appropriate rate of mobility award. There’s a quick run down below for anyone who might be in similar circumstances.

Under normal circumstances, no new claims can be made for PIP after reaching retirement age - you have to claim AA, which does not attract a mobility component. However if you were in receipt of a PIP award which ended in the twelve months prior to reaching retirement age you can re-apply as it’s treated as linked. If you are already in receipt of an ongoing award when you reach retirement age, then you can carry on for as long as you meet the eligibility conditions at reviews etc.

The mobility component after retirement age is tricky. If your claim is reviewed or your circumstances change after retirement age, you cannot receive a new award of mobility component of PIP. However, an existing enhanced rate of mobility component can be reduced or stopped if the assessor judges it warranted, but you cannot be awarded the enhanced rate of mobility component from the standard rate after retirement age, regardless of any deterioration in condition. Any rate of mobility component awarded before retirement age will only continue to be paid at the same rate if the condition on which it was originally awarded remains - any new conditions reported do not impact on the original mobility award.

Not hard to see why some advisers get confused, but I’ve come across existing PIP claimants who have been advised that because their new condition has been diagnosed after retirement age, they should end their PIP claim and claim AA instead - potentially costing them a lot of money as they would lose any mobility allowance paid under PIP. Other advice has been that they will lose any mobility allowance if they report a change in circumstances, and even that their money will be stopped while the change of circumstances are investigated - which may prevent them from reporting changes they are required to by law, and potentially commit benefit fraud as a result.

I wonder if some advisers get confused because they are misinformed Pammie. For instance, if someone told me that they were "just above the Pension Credit threshold", I would expect them to be tens of pounds above and not find out later that they pay tax and therefore have an income of at least £12,570. This amount is a third - £3,000 + - over the eligibility level of £9,495. Suggesting this is "just above" is an insult to those who are eligible to claim it.

There are many on here prepared to help those struggling who may be/should be eligible for benefits. This person appears to have problems because rent is a high proportion of her income - as it is for many. It is nothing to do with Pension Credit eligibility. She is getting help. There is no reason to think she will not continue to get some help. I am very saddened by the whole thing.

I don’t think they are setting out to lose the next election though, I think this is pain now, election promises to come. Whether it will work is another matter altogether, but they are praying Sunak can pull it off.

Ilovecheese

I am puzzled about spending cuts and austerity. According to what I have read, the spending cuts are mainly being delayed for a couple of years, with the suggestion that this is because by then Labour will have won the election and the unpopularity for imposing the cuts will fall on them instead of the Tories.
But surely the cuts and austerity are a political choice and Labour would only need to impose them if they choose to. Am I misunderstanding?

But the cost of them is built into the Tories budget. So if Labour cancel them they then have a deficit hole to fill. The Tories are are also deferring a lot of energy costs, not really fixing the problem. All to be dumped on Labour so that whatever Labour do it will look bad.

Ilovecheese

I am puzzled about spending cuts and austerity. According to what I have read, the spending cuts are mainly being delayed for a couple of years, with the suggestion that this is because by then Labour will have won the election and the unpopularity for imposing the cuts will fall on them instead of the Tories.
But surely the cuts and austerity are a political choice and Labour would only need to impose them if they choose to. Am I misunderstanding?

No you aren’t.

I am puzzled about spending cuts and austerity. According to what I have read, the spending cuts are mainly being delayed for a couple of years, with the suggestion that this is because by then Labour will have won the election and the unpopularity for imposing the cuts will fall on them instead of the Tories.
But surely the cuts and austerity are a political choice and Labour would only need to impose them if they choose to. Am I misunderstanding?

UK only G7 country with economy smaller than before Covid.

www.theguardian.com/business/2022/sep/30/uk-is-only-g7-country-with-smaller-economy-than-before-covid-19

Sorry growstuff my double negative was really clunky. I was saying that I do accept people struggle.

Jaberwok

Surely if you have paid into a state pension fund all your working life, you should, whatever your financial circumstances are the end of the day, be entitled to a full state pension + triple lock or whatever. Its like paying into an insurance policy, and then being told it won't pay out because you are too rich.

Some women got persuaded into paying the Married Women's Stamp.

We were told by our employer many years ago that it was the best thing to do and we would receive a full pension based on our husband's contributions.

Thank goodness I realised after 10 years that was untrue and reverted to paying a full stamp. However, it means I don't get a full State Pension.

growstuff

No, I haven't applied because Macmillan Cancer did a detailed benefit check for me. I've also looked myself at the online benefit checkers. I know I'm not eligible for anything else.

Slightly off topic, but can I recommend that people seeking benefits advice from advisers connected to charitable organisations, check the information that they are given before acting on it - particularly when dealing with PIP.

I worked in benefits and in the last couple of years have had a number of friends newly diagnosed with various conditions ask me to check information as their advisers don’t seem to understand the rules surrounding PIP - particularly after retirement age.

New claims for PIP/AA and DLA for children can all be fast tracked for an enhanced rate award of care component and mobility award as appropriate, in the event of a terminal diagnosis (claimant not expected to live more than 6 months at present, but under review to extend to 12 months). Existing claims for lower awards can be fast tracked in the same way for enhanced care and the appropriate rate of mobility award. There’s a quick run down below for anyone who might be in similar circumstances.

Under normal circumstances, no new claims can be made for PIP after reaching retirement age - you have to claim AA, which does not attract a mobility component. However if you were in receipt of a PIP award which ended in the twelve months prior to reaching retirement age you can re-apply as it’s treated as linked. If you are already in receipt of an ongoing award when you reach retirement age, then you can carry on for as long as you meet the eligibility conditions at reviews etc.

The mobility component after retirement age is tricky. If your claim is reviewed or your circumstances change after retirement age, you cannot receive a new award of mobility component of PIP. However, an existing enhanced rate of mobility component can be reduced or stopped if the assessor judges it warranted, but you cannot be awarded the enhanced rate of mobility component from the standard rate after retirement age, regardless of any deterioration in condition. Any rate of mobility component awarded before retirement age will only continue to be paid at the same rate if the condition on which it was originally awarded remains - any new conditions reported do not impact on the original mobility award.

Not hard to see why some advisers get confused, but I’ve come across existing PIP claimants who have been advised that because their new condition has been diagnosed after retirement age, they should end their PIP claim and claim AA instead - potentially costing them a lot of money as they would lose any mobility allowance paid under PIP. Other advice has been that they will lose any mobility allowance if they report a change in circumstances, and even that their money will be stopped while the change of circumstances are investigated - which may prevent them from reporting changes they are required to by law, and potentially commit benefit fraud as a result.

Whitewavemark2

Reading today, that the planned real term spending cuts for after the next election ( see what they did there?) are so severe as to be implausible.

The great thing is it is so blatant even the right-wing press are aware which means it will get through to some of the Conservative voters.

Reading today, that the planned real term spending cuts for after the next election ( see what they did there?) are so severe as to be implausible.

Further to the poor uninformed chap in the GB audience.

Labour have never presided over such high taxes - ever.

It is a similar situation to Labour in 1997 when they picked up the spending plans from the Major government.

Labour promised to keep to the plans and indeed did so, but as time went on we’re able to reverse so much damage that the Tories had done particularly to schools/education and NHS, which benefited tremendously from labour policy.

Interesting comparisons and a reflection of todays mood, in 2 yrs time it will be different, probably much closer, but I didn’t see anything in the budget that is going to turn the economy round in 2 yrs.
So Labour should get a majority - just when the tax increases really bite.

growstuff

There must be an element of Schadenfreude for Starmer to see the Conservatives destroyed by its right-wing element, but he can't afford to rely on that for victory.

Well, I'm not so sure about that. Have you seen this ?

www.taxresearch.org.uk/Blog/2022/11/18/the-tories-are-literally-dying-out/

There must be an element of Schadenfreude for Starmer to see the Conservatives destroyed by its right-wing element, but he can't afford to rely on that for victory.

I have the same concerns as you rosie.

I would hope they'd make moves to secure trade deals and agreements (eg science, security, work) and eventually rejoin the single market. I doubt if the UK will have full membership again for many years.

Can Labour make a decision on Brexit even if they do win the next election no signs of this from Keir Starmer. I am no fan of Brexit and in my eyes Labour totally screwed any chance of being elected in 2019 as they basically sat on the fence.
Can they just reverse a referendum or would there have to be another one

Casdon

Urmstongran

The intelligent Liam Halligan said last night on Farage (GB News) that he thinks Sunak and Hunt have taken us all for fools. No transparency.

A man in the audience said “if I’d wanted a socialist government I’d have voted Labour’. Many are of the opinion there’s little clear blue water between the two right now.

It’s certainly saved the next Labour Government some of the pain of difficult decisions to rectify the financial disaster, which is a good thing. Upsetting the diehard Tory right along the way is a good by product too. Well done in that respect Jeremy Hunt.

I think it's going to leave Labour with a problem. The "fiscal responsibility" mentality has become so embedded that Labour will find it difficult to reverse the damage which has been done and will have to face criticism from its more radical left.

Labour also needs to make a decision about Brexit.

It wasn't a "socialist" budget at all. The comment from the man in the audience just goes to show how right-wing many people are. It also goes to show that some people don't understand the effects of the measures which were announced. Isabel Oakeshott and Sarah Vine are going with the same theme. It's Reform influence.

Urmstongran

The intelligent Liam Halligan said last night on Farage (GB News) that he thinks Sunak and Hunt have taken us all for fools. No transparency.

A man in the audience said “if I’d wanted a socialist government I’d have voted Labour’. Many are of the opinion there’s little clear blue water between the two right now.

It’s certainly saved the next Labour Government some of the pain of difficult decisions to rectify the financial disaster, which is a good thing. Upsetting the diehard Tory right along the way is a good by product too. Well done in that respect Jeremy Hunt.