Increasing the interest rate to 5%, is this really the fairest way to slow inflation?

But (and I'm no economist either!) how will what you are suggesting reduce inflation?

I am absolutely in favour of increasing taxes, and yes, that would (up to a point) be fairer, but those who don't pay income tax don't get 'hit' by that either - it is workers on PAYE who subsidise non-workers whether or not they are better off, and VAT hits the poor more than the rich.

Balancing the economy is always going to have winners and losers, but the balance between saving and borrowing tends to be swings and roundabouts over a lifetime.

Norah

Foxie48

Unkind reply, Doodledog never advocates for poor becoming poorer.

I didn't say that she did, "The rich get richer and the poor get poorer. If you are OK with that, there's nothing more to say." is what I said, giving her the opportunity to reply if she disagreed or not. Please don't put words into my mouth.

Doodledog

But (and I'm no economist either!) how will what you are suggesting reduce inflation?

I am absolutely in favour of increasing taxes, and yes, that would (up to a point) be fairer, but those who don't pay income tax don't get 'hit' by that either - it is workers on PAYE who subsidise non-workers whether or not they are better off, and VAT hits the poor more than the rich.

Balancing the economy is always going to have winners and losers, but the balance between saving and borrowing tends to be swings and roundabouts over a lifetime.

I'm not an economist, either, but I think I can apply logical thought to the various economic theories and have been doing this for the last few years because I find it interesting.

As regular N & P posters will know, I, and one or two other posters would say that state spending comes before taxation, but, if people are worried about the the tax take, one of the most obvious solutions to the current pressure on people's incomes is to give pay rises which are close, or equivalent to, inflation. Particularly for the public employees whose wages have fallen far behind over the past decade. This would automatically increase the tax take, both income tax and NICs, and from VAT as they spend their incomes into the economy. Increased wages for public employees would not be inflationary because increasing them would have absolutely no effect on prices. (Besides which, some research shows that the wage/price spiral is basically a myth so long as wage increases don't exceed inflation.)

Not only would it increase the tax take via direct taxation, but it would sustain businesses, both those which supply the public sector and those patronised by public sector workers. Which would also increase the tax take.

Doodledog

But (and I'm no economist either!) how will what you are suggesting reduce inflation?

I am absolutely in favour of increasing taxes, and yes, that would (up to a point) be fairer, but those who don't pay income tax don't get 'hit' by that either - it is workers on PAYE who subsidise non-workers whether or not they are better off, and VAT hits the poor more than the rich.

Balancing the economy is always going to have winners and losers, but the balance between saving and borrowing tends to be swings and roundabouts over a lifetime.

If people don't pay income tax because they are on benefits or very poorly paid, then definitely they should not be targeted. I'm retired, I pay income tax, so does my OH. I'm a bit confused about who you mean! With VAT the more you spend the more you pay and some essential goods are VAT exempt, so more wealthy people pay more because they buy more. I'd put up VAT on luxury goods and foreign travel just as a starter. Yup over the years the balance between savings and borrowings swing back and forth but only for those who have savings and many people literally live from one pay check to the next.

I'm paying tax on all my pensions. If any increase is needed, I'd sooner it was on VAT - essential goods aren't taxed, and we have a choice whether to buy the rest.🙂

Batworthy

Increasing interest rates has never slowed inflation when implemented on 13 previous occasions, so I'm baffled as to why our nutty government thinks it will work this time.

Wondering where you found that information please?
I wouldnt mind reading that article.

Germanshepherdsmum

Rent controls would be another nail in the coffin of the private rental sector.

You are not the Oracle of Delphi GSM. Why should your views above be the case? What is your thinking on this?

Many people lived very happily under rent control in the past. With better regulations than we had then, I'm sure they could again.

You seem to have a belief in an almost oligarchic capitalism. However, I really doubt that's what everybody wants.

Why are you consistently so rude and aggressive towards me, Daisy? We have different views on many things but that is no excuse.
Rent controls were introduced in 1915 when nine tenths of the housing stock was privately rented, By 1988 the figure had fallen to one tenth and it was considered that this was largely due to rent controls, which were abolished by the Housing Act of that year.
I expect many tenants lived very happily under housing control but the figures demonstrate that landlords did not.

Rent control not housing control.

Why are you consistently so rude and aggressive towards me, Daisy? We have different views on many things but that is no excuse.

I agree that there is no need for rudeness. This is just a discussion, and people are put off joining in when they feel that their character will be assassinated just for having a different opinion.

All the same, GSM, you haven't convinced me that rent control is not a good idea. If landlords weren't happy, what would they do? There seem to me to be two options - live with it or sell up. In both cases renters would have more chance of being able to save for a place of their own, and find something more affordable than they could now. Hard lines on landlords, maybe - but if we are looking at what is fairer for the country as a whole, a solution that allows everyone the chance to have a decent roof over their heads that doesn't cost them so much that they can't enjoy it is far better than one which allows those who can afford several houses to have a guaranteed income.

DiamondLily

I'm paying tax on all my pensions. If any increase is needed, I'd sooner it was on VAT - essential goods aren't taxed, and we have a choice whether to buy the rest.🙂

Of course you would rather it was VAT. That way the poorest pay the highest proportion of their income should they ever dare to want something others don't consider essential.

Why not kick them when they are down? It's been happening for the last 13 years!

I'm sure that when VAT came in (I was a child) it was genuinely charged only on 'luxury' goods, but that is no longer the case. I don't see it as a 'fair' tax at all.

Germanshepherdsmum

Why are you consistently so rude and aggressive towards me, Daisy? We have different views on many things but that is no excuse.
Rent controls were introduced in 1915 when nine tenths of the housing stock was privately rented, By 1988 the figure had fallen to one tenth and it was considered that this was largely due to rent controls, which were abolished by the Housing Act of that year.
I expect many tenants lived very happily under housing control but the figures demonstrate that landlords did not.

And you consistently make declarations with no argument to support them. That is incredibly insulting to the rest of us. Why are you so rude?

You should know by now that people tend to reply in the same tone as the post they are replying to. Expecting people to accept what you say, just because it is you saying it, is always likely to raise hackles.

Doodledog

I'm sure that when VAT came in (I was a child) it was genuinely charged only on 'luxury' goods, but that is no longer the case. I don't see it as a 'fair' tax at all.

It's not Doodledog. It's very regressive.

VAT replaced purchase tax and was a consequence of us joining the EU. I think it's still seen as being a more progressive tax because poorer people pay a lower % of their income than those who are better off and there are still many essential goods that are free from VAT or have a lower rate of 5% eg home energy. I think I'd like to see a wealth tax similar to the one they have in France eg anyone having assets of say £1.5m or more would be subject to a progressive annual tax. I think it would help to keep house prices down as for many of us, it's the value of our homes that constitute our greatest asset.

DaisyAnneReturns
I think you are the rude one and consistently aggressive towards anyone with a different view to your own. Perhaps you could try a little more tolerance towards others. Report me if you wish, I’m not bothered.

Who and why was it considered that when "the figure had fallen to one tenth" that "this was largely due to rent controls" GSM

Why was the "fact" that a higher proportion of houses that were bombed were in industrial areas, ignored. A much greater proportion of those were likely to have been previously rented. Why was this not considered by your source? It could well have been the case that the owners just took the compensation.

Why, also did your source not consider the vast rebuilding the state undertook after the war and the increase in house buying in the 1970s onwards?

And why didn't your source take into account the fact that it was the Thatcher government that did this and they would have wanted people to believe it, whether it was fact or simply spin?

And, if it were true, which you seem to believe it is, why, with the increase in privately rented homes creeping up, would the corollary not be true and the return of rent controls be the right thing to do?

I seldom agree politically with GSM, although we do agree on other things, but I don't think she is rude in her responses.

maddyone

DaisyAnneReturns
I think you are the rude one and consistently aggressive towards anyone with a different view to your own. Perhaps you could try a little more tolerance towards others. Report me if you wish, I’m not bothered.

Just to set your mind at ease, I have no intention to "report" you.

GSM
"Rent controls were introduced in 1915 when nine tenths of the housing stock was privately rented, By 1988 the figure had fallen to one tenth and it was considered that this was largely due to rent controls, which were abolished by the Housing Act of that year."

I'm not sure that I agree with your figures. Before 1914 home ownership was 15% of the housing stock, by 1938 it was 32% and by 1996 it was 67%.

Public or social housing began with almshouses . During the Industrial Revolution some factory owners built housing for their workers - Saltaire, Bourneville and Port Sunlight. Around the same time, charities started to build public housing such as Peabody. The City of London built a block of tenements in Farringdon Road in 1865. This action was followed by Liverpool Corporation in 1869 onwards.

The state started to take an interest in social housing and in 1885 Royal Commission was held. This led to the Housing of the Working Classes Act in 1890 which encouraged local authorities to build and also obtain subsidies. The next big push came after WW1 with the "homes for heroes" policy.

During WW2 nearly 4 million British homes were destroyed or damaged. Council housing provision was shaped by the New Towns Act 1946 and the Town and country Planning Act 1947. Aneurin Bevan had a vision that this housing would be for everybody, not just the poor. Most houses built then had larger rooms and much space around them than present day private housing.

In 1951 when the Tories came to power, the emphasis changed towards high rise building since the belief at that time was that more people could be accommodated in a block of flats.

The rest is history of which most of us will be aware.

DaisyAnneReturns

Germanshepherdsmum

Why are you consistently so rude and aggressive towards me, Daisy? We have different views on many things but that is no excuse.
Rent controls were introduced in 1915 when nine tenths of the housing stock was privately rented, By 1988 the figure had fallen to one tenth and it was considered that this was largely due to rent controls, which were abolished by the Housing Act of that year.
I expect many tenants lived very happily under housing control but the figures demonstrate that landlords did not.

And you consistently make declarations with no argument to support them. That is incredibly insulting to the rest of us. Why are you so rude?

You should know by now that people tend to reply in the same tone as the post they are replying to. Expecting people to accept what you say, just because it is you saying it, is always likely to raise hackles.

researchbriefings.files.parliament.uk/documents/SN06747/SN06747.pdf

Doodledog

I seldom agree politically with GSM, although we do agree on other things, but I don't think she is rude in her responses.

And you are entitled to that opinion. I sincerely think we are all more rounded human beings in real life than we appear to be on here - at least I hope so.

Doodledog

I'm sure that when VAT came in (I was a child) it was genuinely charged only on 'luxury' goods, but that is no longer the case. I don't see it as a 'fair' tax at all.

A history of VAT in the UK

When it was introduced it did, indeed, replace purchase tax but it was imposed on a wide range of goods and services.

It can be seen that over the years various Chancellors have adjusted VAT rates both up and down to suit their political ends.
It's notable that at the start of the 2008 recession caused by the Global Financial Crisis the Chancellor reduced to standard rate of VAT. I'm assuming that this was to lessen its effect on people with lower incomes. This was reversed 2 years later.

Our current standard rate of 20%, imposed by the tories after the 2010 election, is the highest rate ever charged in the UK.

en.wikipedia.org/wiki/Value-added_tax_in_the_United_Kingdom

From the ONS report on incomes and taxation for year ending 2021

richer households pay a smaller proportion of disposable income on indirect taxes (9%) than the poorest fifth (23%).

The full report here, includes downloadable data.

www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2021

The origin of this thread was the increase in current interest rates to 5%. Many of us suffered from the increases in 1979 to 17%, the 14.375% in 1981 and back up to 14.875% in 1989. At either one of those high points people would have been paying above these B of E figures for their mortgages and many will have suffered financially. For some, it might have been reducing their spending whilst for others it meant selling their houses and some of them will have had negative equity.

Between 2009 and 2022 the B of E rate was less than 1% - ie 13 years. I don't think that there was ever before such a long period of very low interest rates. This will have encouraged many people to buy their home at the maximum price they could afford.

Many people are saying that we cannot compare the problems that my generation had with those of the present day because the numbers are different. However, I think we can.

Then and now, people had/ are having problems making ends meet. Some people will no doubt lose their homes but the banks have agreed to halt repossessions for a year and have also agreed to negotiate with mortgagees on changing the terms of their loans. This did not happen, as far as I'm aware, back in the 70s and 80s.

The difference, as I see it, is the current generation have a far greater choice in what they spend their money on. We did not have expensive mobile phones, IPads, computer games, leased cars and so on. I'm not blaming them because those things are there for them to spend money on.

When we lived in London, one treat was to go to South Ken for lunch in the Polish cafe and shop in the remaindered book shops, followed by a visit to the V & A. When the interest rates hit we didn't do any of that. I remember asking my OH whether we should switch from proper coffee to instant and cancel the Sunday papers, in order to save money. The answer to that was no.

Dinahmo Many people are saying that we cannot compare the problems that my generation had with those of the present day because the numbers are different. However, I think we can.

Then and now, people had/ are having problems making ends meet. Some people will no doubt lose their homes but the banks have agreed to halt repossessions for a year and have also agreed to negotiate with mortgagees on changing the terms of their loans. This did not happen, as far as I'm aware, back in the 70s and 80s.

The difference, as I see it, is the current generation have a far greater choice in what they spend their money on. We did not have expensive mobile phones, IPads, computer games, leased cars and so on. I'm not blaming them because those things are there for them to spend money on.

Agreed

Last paragraph, some people don't, for example, save to a deposit - rather spending on phones, nails, takeaways - their choice.