Labour pledges ‘economic rewrite’ with radical election manifesto
Labour has put forward a raft of changes in its election manifesto with the aim of ‘rewriting the rules of the economy’. Philip Fisher examines what the party is proposing through an accountancy lens.
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Note that the small company rate will apply to companies with TURNOVER under £300K, not PROFIT as before.
Dividends tax will be aligned with the rate for other income, up from 7.5% to 20%.
Never mind those with £80K paying 'a little' more tax. Basic rate small business owners will see their marginal tax burden going up from 25% to 41%.
Spot on, Jon. But will the smaller OMBs actually make a profit, on which to be taxed? With 32 hour working weeks, 4 more bank holidays, statutory breavement, worker-directors and a 22% overnight increase in NMW, I suspect not. Then with no difference in the rates of PAYE, dividend tax and CGT, as you correctly say, what would be the point in taking the risk? Might as well all sign up for the new universal credit and wait until the lights go off.
Not only will basic rate taxpaying shareholders pay a 41% effective tax rate on their profits (corporation tax plus dividend tax), but higher rate taxpayers will have a 59% effective rate and, if the claw-back of personal allowance above £100k is retained on top of a 45% higher rate, the effective rate on that slice of income will be 76%.
Dear god
At what point does hire rate dividend tax come in
They might have to rethink this for the many not the few lark
Not only will basic rate taxpaying shareholders pay a 41% effective tax rate on their profits (corporation tax plus dividend tax), but higher rate taxpayers will have a 59% effective rate and, if the claw-back of personal allowance above £100k is retained on top of a 45% higher rate, the effective rate on that slice of income will be 76%.
How do you come up with those %?
The IMF are screaming at everyone to spend more money.
All over the Western world, growth is near zero because the private sector is at peak debt.
Decades of neo-liberal economic policy (creating all new money in the economy as bank credit money) means that we have run out of people willing to borrow even at 0.25% interest.
To paraphrase Mrs. T
"The problem with Neo-Liberalism is that eventually you run out of other peoples ability to take on more debt."
Why?
Where do you think the IMF gets Sterling from? Since HM Treasury owns the BoE outright wouldn't they just cut out the middleman?
Under Labour the incentive is to replace capital with Cheap Labour. A policy the Labour Party is wholly in favour of.
"Ensure that income from wealth is no longer taxed at lower rates than income from work"
= 40% CGT
I encourage anyone with the time to actually read the detail within the proposals. A scary world - I am sure it refers to a Ministry of Truth - a dystopian future world where I am sure that will mean the truth is then controlled as they spy on us via our free broadband connection.
I don't worry about the tax more the State control, read where it says about a "common national rulebook for schools, as determined by legislation". Monitored no doubt by some new Quango politically indoctrinated.
Really I suggest put the tax aspects aside, read the rest of it and what would become an attack on our individual freedoms and choices
Also watch the Maureen Lipman mock BT advert circling today and a classic line "he would nationalise daffodils if he could"
When I saw the headline, I thought I would see a forecast of the country's Balance Sheet and/ or Cashflow for the next 5 years showing line by line tax revenue and spending. In an Accountant's perspective, numbers are sometimes flexible but more often than not numbers dont lie and that would be extremely helpful if we truly want to buy promises.
When I saw the headline, I thought I would see a forecast of the country's Balance Sheet and/ or Cashflow for the next 5 years showing line by line tax revenue and spending. In an Accountant's perspective, numbers are sometimes flexible but more often than not numbers dont lie and that would be extremely helpful if we truly want to buy promises.
Yep we have been advised that this manifesto is fully costed and indeed fully funded. Well it must have been hidden in some very small print because I did not spot it. Some very vague terminology giving a lot of scope. Trying to inform folk that a digital sales tax will merely be collected from the big tech companies but like VAT and IPT guess who will bear it
The slightly sad situation for political balance is I can't see the Tory manifesto being any better. Jeez for a political party that can make the centre ground the sensible place to go
You'll notice John McDonnell says "We'll pay with bonds" a lot.
He's been saying it with suspicious frequency.
He also said that it would not cost a penny in tax NOR add a penny to the debt.
And I'm like... "how does that work"
And then I remembered the £450Bn worth of QE.
The BOE have a cookie jar with £450Bn worth of bonds inside and John McDonnell plans to make merry with it.
We need to add money to get the economy going, so why not?
When I saw the headline, I thought I would see a forecast of the country's Balance Sheet and/ or Cashflow for the next 5 years showing line by line tax revenue and spending. In an Accountant's perspective, numbers are sometimes flexible but more often than not numbers dont lie and that would be extremely helpful if we truly want to buy promises.
When I saw the headline, I thought I would see a forecast of the country's Balance Sheet and/ or Cashflow for the next 5 years showing line by line tax revenue and spending. In an Accountant's perspective, numbers are sometimes flexible but more often than not numbers dont lie and that would be extremely helpful if we truly want to buy promises.
The accounting of a country is not the same as a company.
Companies are currency users. Countries are currency issuers.
If the amount of new goods and services rises by 2% a year, the money supply has to grow by 2% a year or you will have deflation.
How is this new money created?
Well, either government creates it or the banks do.
When the banks create it, it must be paid back with interest so eventually, if insufficient high powered money enters the economy, people will run out of the ability to borrow.
And that's where the Western world finds itself today.
"“close the tax loopholes enjoyed by elite private schools and use that money to improve the lives of all children”
So its not all bad news - first with all this largesse floating about, there'll be no requirement for Children In Need appeals - secondly, ending tax breaks for "elite" schools will severely hamper the supply of future Labour ministers (cynicism mode off).
Were we amused to note that they ignored most of the eye watering cost in their “fully costed” manifesto? Were we amused to note the somewhat fantastical predictions of how much tax their rate increases will actually produce, even before taking into account the likely impact on economic activity of all sorts. No on both counts!
It’s easy enough to copy and paste from the extensive wish list, but where is the in depth analysis?
Haven't looked at either in huge detail but it struck me that Conservatives seemed to be offering a long list of promises with little in the way of additional tax revenue being generated too?
It would be nice to see some numbers but then that would involve forecasts and relying on experts and no one seems to like experts any more!
You don't actually expect any of them to deliver on their promises do you? I gave up on that idea years ago along with Santa and the tooth fairy. Numbers would be fun to see though.
Bonds... there's £450Bn worth of bonds sat in the BOE.
You can buy an awful lot of Smarties for £450Bn.
Ye gods and little fishes - we all new roughly what to expect but this surpasses even my wildest imaginings. If anyone is foolish enough to grant this any credence it will be a sad indictment of their faculties.
The whole is so utterly ludicrous as to merit not detailed analysis but one proposal does appeal; the removal of the proposed quarterly tax reporting for those beneath the VAT threshold. I am drafting a letter to Mr Corbyn, suggesting that if he would care to drop the entirety of his terrifying manifesto, with this one exception, he will be able to count on my vote!
David Cox
I see the income tax hike is set for those over £80,000, that's the basic pay for MPs so they would miss that then. Clearly nothing to do with self interest just a happy coincidence I would guess.
We agree that the UK government can create its own money (UK pounds)?
So *theoretically* the UK government could simply cut all tax to zero and pay for everything with new money.
Right?
That's theoretically possible.
Why is it not actually possible?
___inflation___
Right! Inflation!
Therefore the purpose of taxation is?
The control of inflation.
Taxation is there to sink money out of the economy to prevent inflation.
So, is there a lot of inflation?
Its bounced along at what 2% or under for the last 10 years.
So... Lets do a worked example:
What happens if the NHS employs 100 more doctors and pays them £300 a day?
GDP goes up by £30,000 a day but debt only goes up by £20,300 a day because the doctors pay tax.
OMG!!! Debt to GDP falls! We've employed 100 doctors and we've reduced debt to GDP from 88% to 68% !!
By employing doctors.
But your debt went up by £20,300 a day, and sooner or later someone has to pay for that. Also, you cannot take paying some doctors in isolation and then claim to have reduced the debt to GDP ratio, as endless Govt spending increases eventually come home to roost. Just look at the end of the last Labour Govt when their spending resulted in a deficit of 10% of GDP.
Also, your spend results in a one off boost to GDP at an ongoing cost of £20,300 a day. In year two your extra spending has no effect on GDP but we're still funding the £20,300. Yours is the ploy Labour used last time to increase growth figures and hide some of the reckless spending - and it all comes unstuck when you can't keep raising spending, as we found out.
"But your debt went up by £20,300 a day"
You are assuming that that the doctor pays his tax and then burns the rest of the money.
Of course what actually happens is that he spends his money into the economy which is earned by shopkeepers and plumbers, etc and is again taxed and earned and taxed, etc and so on.
By this process of churn the government can get back 3 to 4 times the money in tax that it paid out originally (IMF figures, not mine)
This is how growth in the economy reduces debt to gdp.
It is important to note that "debt" in this context is not debt.
It is merely the sum of all money the government has created and not yet taxed back.
The "debt to GDP" measure IS important in that it tracks the amount of money created vs the countries productivity but "debt" is not debt in the way you and I think of debt.
If you can create your own money you can never be in debt.
You can create more money than your economy can handle, yes.
That's what the "debt to GDP" ratio is for.
What about government borrowing?
Government's DO NOT borrow. They allow you to deposit money with the central bank.
Government spends money into the economy but there's a limit to how much it can spend or it creates inflation.
So what if there was a way to take money off the public and stop them spending so the government can spend?
OK, that's called taxation. People don't like taxation.
How about another way to take money out of the economy but... people get their money back at the end?
What would that look like?
A fixed interest savings account at the Central Bank?
Yes. That's what bonds are.
You deposit your money (buy a bond) and you get a fixed interest and your money is locked up out of harms way where it can't cause inflation.
Note that government CANNOT spend that money. The whole point is to control inflation by REMOVING the money from the economy.
So its on deposit. It is not spent.
So if its not spent it can all be paid back immediately, because its on deposit.
"In a monetarily sovereign country such as the United States of America, the United Kingdom and most other countries, government debt held in the home currency are merely savings accounts held at the central bank. In this way this "debt" has a very different meaning to the debt acquired by households who are restricted by their income. Monetarily sovereign governments issue their own currencies and do not need this income to finance spending."
"No quarterly reporting for businesses below the VAT threshold. This appears to be a promise not to go ahead with MTD quarterly reporting for income tax." . . . .
. . . . So at least there's one good thing in the manifesto.
"No quarterly reporting for businesses below the VAT threshold. This appears to be a promise not to go ahead with MTD quarterly reporting for income tax." . . . .
. . . . So at least there's one good thing in the manifesto.
I would say thanks for small mercies but I just reckon they would have a worse plan up their sleeve. I reckon the nationalisation of us accountants to become part of a British & International Govt Tax Inspection Team (the collective acronym will be good if nothing else)
The key words in Philip Fisher's opening are ......''what the party are PROPOSING....''
Does anyone in their right mind believe a word of this utter crap from Corbyn or for that matter the similar crap expected from Johnson ?
So sorry that Jeremy didn't go to the cinema to watch ''Sorry We Missed You'' . Perhaps his party should take on Ken Loach as an economic rewriter - or at least to try and find out the realities of our current Dickensian workplaces . Workers rights indeed. Power to the people ain't gonna work.
I've been watching politics intently just recently and it's quite obvious that the major parties are trying to buy votes. I agree with JC to the extent that this country (indeed the world) needs a radical change in the way it works form politics downwards (and upwards). The main problem for radical change is economies are nearly always dominated by market forces. So you cannot change that. What you can change is, though, the way that we handle our creation of wealth and what we do with it. Labours manifesto seeks just to have one cake divided so that each get an equal slice (old labour). The Tories aren't much better, although they do understand you have to create many cakes so that the poor would get a thicker slice than they would if there was just one cake. What has happened in the world is that the rich have got richer and the poor poorer. Technology has increased so much that we have high techies and low techies. Large multinationals have dominated without putting enough back in. What is the answer??????????? No doubt we will just plod along. However history states that when we get into this position something happens to re-align the status quo. Any ideas?
The terrifying thing is that a lot of people have no interest in politics, don't watch the news, don't read papers and I have even come across someone who hadn't heard of Jermy Corbyn. Who do you think these people will vote for?
Be very, very scared.
I haven't voted for a party for years but I always place a vote against the morons by voting for the least worst alternative.
The burden on the small Ltd company will be just too high to bear.
We will end up having a mass of small companies being liquidated and they will trade as sole traders and partnerships.
In summary they want to nationalise everything and screw the self employed. So does the labour party want to obliterate the self employed and have everyone work for the state?
Have a look at the Shadow Economic to the Secretary to the Treasury : Jonathan_Reynolds on wikipedia. Or Shadow Chancellor of the Exchequer John McDonnell.
Absolutely ZERO experience for their jobs. ZERO. They have literally ZERO experience of generating economic wealth.
Spare me these utterly unqualified cretins. How many have worked in industry? Run a company? Worked outside of the public sector?
What a load of tosh - and I’m not referring to the manifesto
I suspect that you’re about to fall at the next fence.
For completeness, I can reveal the Conservative manifesto in full:
Disgraceful. They called the election so should have been first out of the blocks, not tail end Charlies. Economically the big question to ask in this election is whether you believe in fairies or leprechauns.
We’ll start with the fairies a.k.a Labour. Planning to spend a colossal amount on all manner of infrastructure and revenue projects, some of which are much needed and some of which are questionable. The first fairy godmother we need must make hundreds of thousands of suitable qualified and experienced construction workers appear on 13 December 2019 and start pouring concrete.
The second fairy godmother will make the financial markets ignore these spends, and thus allow the new Government to borrow at current rates. The credit rating agencies have already taken fright at the plans of the leprechauns –see below – so we can be very confident that, if Labour were lucky enough to get enough bond issues away to fund their plans, they’d be paying dearly for it.
Because the Conservatives are planning to introduce lots of extra documentation to ship goods across the Irish Sea, I am marking down their plans as the leprechauns. They called this election but, unlike Labour, have so far not even seen fit to publish a manifesto which is a complete disgrace. So, whereas with Labour you can cast doubt on how they might cover the extra spending, with the Conservatives this is a pure “finger in the air” as they’ve not bothered telling us.
Neither party has taken into account the risk of a likely global recession in 2020, or the negative impact on key sectors of the UK economy of leaving the EU next year either.
The worst effort I have seen from both main parties in 40 years.
Agreed, both very poor. What do they actually do? During the past 3 years whilst they've been distracted with Brexit rather than the day to day of running the country, the country has not suffered- have a look at the historic GDP stats on www.economicsonline.co.uk.
I think they are (all) only capable of organising the deck chairs.
A) There's £450Bn in bonds at the BOE that could be spent now.
B) Governments don't borrow. Government can create its own money and could tell the bond market to go **** itself tomorrow.
The theory:
Government has to offset its spending by selling bonds in exact relation to the money it creates thereby sterilising its own spending and controlling CPI.
The facts:
The BOE bought £450Bn of bonds and CPI didn't rise a jot.
If you're selling bonds to lower inflation then buying bonds must raise inflation.
If you buy bonds and inflation doesn't rise, why sell bonds?
Selling them clearly doesn't lower CPI.
Bonds are free money for the already wealthy.
The REAL purpose of bonds is to ensure that the already wealthy cannot be overtaken by the 99.9% by ensuring that they get a cut of any money that enters the economy first. In this manner, in relative terms, they cannot become "poorer".
And in the end its all relative isn't it?
If you have £10m you're rich.
If the government give everyone £10m you have £20m !
But you will be driving yourself to an empty factory on Monday where you will be making your own tea and cleaning your own toilet.
Was in the UK in late 60's, early 70's. And then Labour was to the right of the current lot! Therefore only comment I have is that if current Labour and the anti-semite Corbyn gets into power Spain/France will get a new resident.
My main clients will go belly up anyway with the far left policies so little business to still have, with my smaller clients (mainly IT) already telling me Europe beckons then in a Labour scenario. Shame really.