Taxing the wealthy, point of discussion.

growstuff

Which non-essential handouts and benefits do people receive from the government?

I'm genuinely interested because I'd like some.

There are many here ls one

Birmingham spent £18m of special needs transport for special needs children last year, this may be desirable but it’s not an essential need.
Cutting it out means more can be spent on child protection hopefully preventing recurrence of cases like Sara Sharif which I would regard as first priority.

There are many many others including WFA.

You're not talking about individuals having spare cash, (which is how, I think, Dd and I interpreted it) are you David. You are talking about the state not having any spare cash, aren't you?

Which is a pretty mediaeval view of the state budget when, in truth, it creates all its 'cash' and, subject to constraints such as the non availability of resources, has no reason ever to be 'short' of it.

The political message, which we've been relentlessly fed over the last 40 or so decades, of 'black holes' and household type budgets is absolute nonsense.

Keynes had the right of it back in the '40s. 'Anything we can do we can afford'

Which non-essential handouts and benefits do people receive from the government?

I'm genuinely interested because I'd like some.

It was your use of the word “subsistence”, we need to demand less of the services and benefits we get and concentrate on the essentials. The nonessential frills we have cost a great deal cut them out and we have more to spend on essentials like children’s services, and elderly care.

I believe the state should provide the essentials, and those that can afford to support themselves should not be getting free handouts or benefits. We will see how far Labour go down that road at the budget.

David49

Doodledog

It wouldn't operate if we all lived subsistence lives.

The issue is not about subsistence, it’s about paying for services that we demand from the government. We need to protect the vulnerable but whatever services we want we have to pay for, there is no free lunch.
So either demand less or accept we need to pay more.

When it is the government that issues, directly by spending, or indirectly via the banks, most of the money in the economy it seems like a really torturous process to issue the money and then get it back off us to pay for state services! The government paying directly for them would be so much less complicated😆

So, of course, that is how it does actually work.

I would have said the same as Dd. We'd live subsistence lives. A few million of us already do... But the 'spare cash' is what drives the economy. It has nothing to do with providing state services.

How does what I said contradict that?

The question was how the economy would operate if we didn’t have spare money to circulate. My reply was that it wouldn’t. A subsistence income is one where there is no spare money. You seem to be arguing for the sake of it.

Doodledog

It wouldn't operate if we all lived subsistence lives.

The issue is not about subsistence, it’s about paying for services that we demand from the government. We need to protect the vulnerable but whatever services we want we have to pay for, there is no free lunch.
So either demand less or accept we need to pay more.

It wouldn't operate if we all lived subsistence lives.

I wouldn’t like to see what happened to our economy if no-one had any spare money. Would you?

Agreed.
So, it seems to depend on your individual beliefs how you perceive others' spending habits.

You might view people who don't spend money as deliberately unwilling to contribute to the common good. You might also criticise them for not stimulating economic growth in communities. Whereas I might see these people as good role models, with their donations to charities, and their being more than self-sufficient.
I'm not rich enough to understand how peoples' minds work in these situations, but I agree with David earlier that improving your life and your family's life is tops. To be honest, that's what causes me anxiety and a desire to squirrel away my money. No self-righteousness.

The rest of us can get a tax deduction too. And at the higher rates.

I think all we can do is what we can given what we've got, and where our various comfort zones sit.

Some prefer to spend, some to save, many do both and some can't easily do either.

It's when people go on about how what they do is for everyone's benefit and get self-righteous about how they prop up the economy by saving, by spending, by being self-employed or whatever that it can be annoying. Most of us do what works for us - there are very few unselfish people when it comes to personal finance.

The likes of Bill Gates can donate millions to charity, but writes it off against tax, and anyway has more leftover than he could possibly spend. The rest of us muddle through one way or another and keep quiet about it - it's just best to be honest when discussions do arise. Most of us make no ripples in the water .

GrannyGravy13

So basically if we save for our retirement we are screwed!

The alternative is to spend every last penny, rely on the state to look after us in our retirement, and again we are screwed!

If I was a conspiracy theorist I might think that the assisted dying Bill, had an alternative agenda.

😁

Well, it would save a few ££££ certainly.

We can be spenders unless we've first saved the money, so many people are both.
As far as keeping local tradespeople going, we looked at a new kitchen but April is the soonest it could be fitted and as for decorators - a year to 18 months wait!

MaizieD

Big businesses run on loans...

In the 80s I worked for one of the top 3 firms of chartered accountants with a few hundred partners. The year end was 31 December and each December the only bills paid were salaries. No drawings for the partners. The reason for this was getting the bank account into credit once a year. The rest of the time the firm operated on its overdraft facility.

MaizieD

That's daft, GG13. No need to go from one extreme to the other.

I probably should have put an emoji on the end to indicate that it was tongue in cheek

That's daft, GG13. No need to go from one extreme to the other.

So basically if we save for our retirement we are screwed!

The alternative is to spend every last penny, rely on the state to look after us in our retirement, and again we are screwed!

If I was a conspiracy theorist I might think that the assisted dying Bill, had an alternative agenda.

So what are they spending?

Doodledog

Yes, I know - I was agreeing with you, and responding to GrannyRose, and to newnanny above.

Sorry - done it again - that was to Maisie.

Yes, I know - I was agreeing with you, and responding to GrannyRose, and to newnanny above.

Too much saving is bad for the economy which is Japans problem nobody spends much.

Yet our own government encourages us to save or pay into pensions and gives us incentives to do it, it probably is correct that large savers pay least. However interest on savings are taxed but with interest rates low very little is contributed to the economy

Yes, so those who have large savings pots are getting interest, the bank is getting interest too, and the savers still have enough to spend, and it is that spending money which props up the economy.

The people with the large savings pots are least likely to spend and they certainly don't spend anywhere near enough to prop up the economy. That is the long discredited 'trickle down' theory 😁

The interest is their profit, and pays the high salaries of the top management and the huge annual bonuses...
Yes, so those who have large savings pots are getting interest, the bank is getting interest too, and the savers still have enough to spend, and it is that spending money which props up the economy.

Meanwhile, their less wealthy neighbours, who 'spend everything they have' are paying a much higher overall rate of VAT (as a percentage of income), and are simultaneously spending more of a percentage of their money on paying the wages of the hairdresser, the plumber and the others who don't 'rely on employers to look after them', as well as the wages of those who are employed to serve in shops, sweep the floor in the hairdresser and so on.

Public sector workers pay tax too, which seems to be often forgotten in conversations like this. Often there is a trade off between relatively low pay and relatively good conditions in the public sector - the much-resented pensions are not free, they rely on employee contributions, and the employer contributions form part of the salary of the workers.

I don't understand newnanny's point upthread about people paying more tax because others spend their money, though - how does that work?

In reply to GrannyRose, I have some savings (not much now, as I have spent a lot on living expenses as my pension age was delayed, but that's by the by). I didn't invest in business - in fact my only 'investment' is in a small S&S ISA - at the level of savings I have I can't afford to take risks, so I save, rather than invest. Nobody is going to retire on what they make on my accounts, whether I save or spend, but the only time my savings help the economy is when I use them to get things done to the house, and employ decorators, builders etc to get it ready for older age, or go on holiday in the UK etc. The rest of the time, I circulate my money from income by buying things and using services such as hairdressers, podiatrists, and the like.

I can't see how any of this gives anyone the moral high ground. If you work and pay tax you are contributing, whether you work in the public sector, the private sector or are self-employed. Savers only contribute directly via the tax they pay on the interest on their savings. I fully understand the desire to have some money in the bank, particularly as we get older, so also understand why people object to seeing savings diminished by tax. In fact I think that protecting ourselves from poverty is an instinct rather than a desire, when we look ahead to becoming less able to earn new money, so need to rely on what we've put aside. I think those objections are reasonable in themselves, but am less keen on their being couched in moralising, although I also understand that we all tell ourselves stories to explain our actions, and they usually justify whatever decisions we've made along the way .

Big businesses run on loans...

GrannyRose15

Doodlebug
Savers do not take money out of the economy. They invest it in business. Where do you think people get money from to start new businesses. They get it from banks who can only lend because other people have deposited money in them. Likewise big business couldn’t run without shareholders who have invested their savings.

growstuff has already posted the Bank of England's explanation of how bank loans create new money; no depositors' money is involved. In fact, in the process the banks take some money out of the economy because, although their loans are 'new money', and do promote economic activity, they charge interest on the loan and so take back more money than they create. The interest is their profit, and pays the high salaries of the top management and the huge annual bonuses...

Only banks licensed by the state are able to create this new money. And, as pointed out, it is subject to regulation.

Contrary to popular belief, people who buy shares are not contributing to the businesses capital, unless they are buying shares in a new business, or shares a business has issued in order to increase their capital.

Most shares are bought on the secondary market in the hope that they can either be resold at a higher price (i.e for speculation) or will provide a good income from dividends. The purchase money for the shares bought on this market goes to the seller. It goes nowhere near the company.