UK Taxes - Well spent or mismanaged?

(Matt) #1

It’s nothing to do with austerity but everything to do with a broken housing system and insanely high taxes. People would be able to save if they weren’t bled of all their money through taxes and high rent.

In a country where the average salary is £27k, and the cost of living in London is roughly £800+ a month (and that’s for somewhere unpleasant, inc. transport), most people are going to be broke. If you’re lucky enough to have a good salary, watch as almost 50% of your pay cheque disappears on taxes, pensions and student loans.

Have you left it too late to start saving?
(Jordan) #2

Isn’t the above the result and part of the definition of austerity? All could be solved by changes in the governmental system couldn’t it? The system is designed to beat the majority of people, which makes saving pretty difficult IMO.

( related to Monzo CEO, Investor in Monzo ) #3

do you think taxes are “insanely high”

(Jordan) #4

In my personal opinion, no I don’t think taxes are insanely high (admittedly I am a basic rate tax payer) but my chosen career may lead me to possibly pay additional/higher rate tax. Taxes are almost a “necessary” evil for the betterment of society. Although how those taxes are spent are another thing altogether.

I don’t think the government helps to encourage saving nor do they educate about saving - which is for me where the core issues lie.

(Matt) #5

Not at all. The housing started to become broken back in the 80’s when room restrictions were lifted by Thatcher, and then Blair made it easier for homeowners to buy multiple properties. Mix that in with an increase in immigration and a heavy focus on increasing university admissions and suddenly buying multiple properties exploded as they became easier to rent than ever before.

As for the salary being low, that’s not something new either. It’s always been low, and taxes have always been high due to poor management of them. Welfare spending has increased from £100 billion in 2001 to £174 billion today, even though the government sets a target of £100 billion a year. It just ignores it and ploughs ahead with throwing money at the welfare system.

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(Matt) #6

I find it hard to defend taxes when the government lumps together in the same tax bracket people earning £50,000 and £150,000. Also, what country are you comparing you taxes to? Many others have either lower taxes, or far better public services.

(Jordan) #7

That’s still not to say that the government couldn’t fix it - the Help to Buy Scheme isn’t exactly all it is cut out to be as the whole system around it is flawed. The LISA on the other hand is useful but that doesn’t make up for the fact that the government haven’t really been helping to regulate the housing market in any way and just sort of let it grow and grow.

I’m not comparing taxes to any other country and didn’t claim to? I didn’t say I don’t think they are high as compared to X. My personal opinion is that for the things we are fortunate to have, paying taxes is part of that. What I did say is that the way those taxes are used and spent is another matter - the government could certainly be doing more to help those who need it most/ more.

(Matt) #8

A government could fix it, but none of them have. It’s been an issue under both parties, and neither one are taking it seriously. Why would they when a large amount of the electorate have hundreds of thousands, if not millions, of pounds tied up in property? Any solution would inevitably result in a drop in housing price, resulting in lost votes.

From 2001 to 2015, property prices have increased somewhere between 300 - 450%. Nothing has been done to attempt to offset this, and for the next decade, nothing will be done until the majority of the electorate are no longer homeowners.

Compared to…? Taxes in the UK are high if you look at the quality of public services compared to other countries. Without a comparison, you cannot claim if something is high, or low; there is no baseline to reference against.

(Jordan) #9

I agree, an didn’t suggest it was one party or the others fault - the market has spiralled out of control and the government at all times has done next to nothing to change that. It could have been assisted but hasn’t and that causes a real problem in terms of saving up for a deposit.

I genuinely have no idea what other countries taxes are, and don’t really look to those for a figure to base against, as IMO it should be on a case by case basis. I personally, don’t think, for what we get the tax I pay is that high, nor do I think if/when I encroach onto additional/higher rates that it will be unfair for me to put more in. I feel like tax is an entrenched part of our system and cutting drastically would be pretty catastrophic.

Compared to the Cayman Islands, most countries have high tax. Why is it you think tax is insanely high/ what should the levels be? I’m no political expert or economist - but I don’t think the government(s) since I have been of an age where it can really affect me has done much if anything to assist saving/ prosperity on an individual level and a societal one.

(Nick) #10

I’m going to quote the following poster here, because they say almost exactly* what my first response would be:

Here’s the thing. It’s all connected. Yes, the housing market was overinflated before austerity. But before austerity, people were still able to service that debt (even if doing so meant they were banking on a future with no problems, but that’s another issue). Austerity meant that debt is no longer servicable as-is, so one of two things happens. The house is lost, or cuts are made elsewhere to cover the housing costs.

By rights, the housing market should’ve depressed as a result of austerity, but circumstances combined to fuck that up (pardon my French). You had the large number of people already on the ladder who were terrified of negative equity (so didn’t want to sell at a loss), you had the housebuilders who didn’t want to build and sell at lower numbers because why would they want to give up their old margins, and there was the fact that demand had been outstripping supply for a number of years. And that’s just the domestic factors; if you look further afield, you’ll see austerity gave much greater buying power to international buyers which is what allowed certain markets coughLondoncough to remain inflated by foreign buyers using their now greater buying power to maximise their investment opportunities.

The goverment didn’t help with ‘Help To Buy’. In theory, should’ve helped people on the market because house price = borrower’s money + help to buy. In reality what happpened was the help to buy money got tacked on the other end of the deal, so what should’ve been ‘house price’ became ‘house price = house price + help to buy’.
This is, incidentally, the same problem of using the bank of mum and dad to buy a house. The buyers can’t afford the houses, the market should drop - but. The top of the market get the bank of mum and dad to chip in, so the houses do sell at those higher prices, so the market doesn’t drop and people who can’t get help are fucked (again, pardon my French).

the tl;dr, for this section is, there are a lot of forces continuing to inflate the housing market above where it should be.

Now, taxes. Big news - the UK does not have insanely high taxes. They’re pretty fair, as taxes go. The VAT increase has been swallowed with barely a blip on the scale. Rather, the problem with taxes is this:

When central government takes taxes, it has massively reduced the amount of money it then distributes around the country to local government. And I mean, massively. We’re talking millions on millions of pounds here. And you know why, don’t you - austerity.

This has two broad effects. One way councils have to deal with the lack of money coming in every year is by making efficiencies (or rather, cuts). They can’t afford everything, so they have to cut things to the bone to make them work with the money they have. The other way is to cover a certain amount of the shortfall by raising council tax. Not because they want to, not because they’re being greedy, but because they have to cover the shortfall. The only alternative to raising council tax is cutting services even further!

Now, you may think that council tax is insanely high - but that’s because central government hasn’t cut tax but has cut what local government gets. Why? Because they’re filling holes in their own books. Why? Because they bailed out the banks.

So you see, it comes back to austerity again.

If there was no austerity, if the local government and the public sector was still being properly funded centrally, local taxes wouldn’t be going up as much as they have, then there wouldn’t be a perception of ‘insanely high taxes’.

(I haven’t even touiched on the complicated issue of how the superrich can avoid paying taxes and how just getting one company to pay their tax bill would actually fill in far larger gaps in the budget than any increase on us plebs would).

tl;dr, Austerity was the wrong decision to make, it sucked then, it sucked now, and it will continue to suck as long as those in power keep trying to flush everything down the drain.

*Only difference being I wouldn’t phrase it as a question

( related to Monzo CEO, Investor in Monzo ) #11

"If there was no austerity, if the local government and the public sector was still being properly funded centrally, local taxes wouldn’t be going up as much as they have, then there wouldn’t be a perception of ‘insanely high taxes’. "

so back to the thread topic don’t bother saving just keep borrowing until it all goes pop :slight_smile:

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(Nick) #12

You may joke, but this was actually very close to the story of my twenties.

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(Jordan) #13

I do think a core issue with saving in general though is the education of what saving is and how to do it. We always make jokes about how we will never use trigonometry or something similar in maths. Wouldn’t it be prudent to teach savings, how interest works, what it means, how ISAs work and all the rest in schools. Not saying you need to start saving when you are 12-16 but having the knowledge about what it means to save would be so useful.

(Matt) #14

My point is just that the issues we face today with living expenses and the struggle to save is not to do with austerity, but stretches back to the 80’s, and can’t be assigned to any one government or party.

Without comparing the UK to another country, you have no frame of reference for “good” or “bad”.

Also, please don’t take quotes out of context by dropping half of a sentence:

That answers your question of why I think UK tax is high :neutral_face:

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(Nick) #15

I work in the public sector. So I can tell you, with some authority, that what you are seeing can be directly traced back to austerity.

(Jordan) #16

I never suggested it was just down to Austerity - but it has definitely played a part?

I don’t agree with this point, all countries operate very very differently, and therefore to compare them isn’t correct. What countries would you compare the UK’s high tax (compared with quality of public services) to? What country does it better that has had the same contextual background?

I didn’t. The quote I used directly above quoted the whole of your sentence. I was particularly interested in your comment on “taxes are high”. Taxes being high doesn’t mean our public services should be of a higher quality, because it is down to the government in how they spend that money.

(Matt) #17

How so? The inefficiency of the civil service is nigh-on legendary, and existed prior to austerity. Having worked in the Civil Service, and knowing many others who do (and in the NHS), bad management is rampant and a result of Civil service/government mentality rather than austerity.

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(Matt) #18

I’m not an expert in the taxes of other nations, but tax is extremely high in the UK when you consider all the different taxes levied on the employed. When you combine mandatory pension contributions, National Insurance and Income tax, you’re looking at roughly a level of 36% tax, which increases after the higher tax level is levied. Factor in VAT and council tax on top of that, it’s suddenly noticeably higher than other developed nations.

As for the bailing of the banks…I think that has little to do with the lack of money. The one glaring overspend of the UK every year is welfare. £174 billion last year, up almost 100% since 2001. The bailing of banks amounted to about £27 billion. If welfare was brought down to the government agreed limit of £100 billion, the banks could be bailed with change to do it twice more, within the same year :joy:

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(Micky) #19

You can opt out of the work place pension but there is a minimum rate which you must pay if you choose to contribute.

I don’t see how you could cut the welfare budget if you consider there has been cumulative price increases of around 60% and a 10% increase in the UK population since 2001. Do you make cuts to state pension? start taking food off peoples tables who are already struggling to put clothes on their back? Scrap benefits for people with disabilities to get them back into work?

(Nick) #20

You’ll appreciate that to a degree, it is difficult for me to provide a detailed response to this - I’ve no desire to put my own position at risk. I hope these broad-strokes points manage to serve the dual-purpose position of protecting me while providing enough of an answer for you.

Firstly, the civil service is not the public sector, only a small subset thereof. I cannot speak to what they do (or don’t).

Bad management is a separate issue. I agree bad management should be stamped out, phased out, or improved. But.

You can have a bad manager with a $budget and they can deliver a service that is successful in spite of that. Maybe ineffecient, I’ll grant, but successful. But take a bad manager and give them $budget-millions, that’s going to show up the effects of austerity, not bad management.

It’s not hard to find evidence of all the cuts.

The cuts potentially compound bad management. Experienced staff have been shed because they’re the most expensive staff.
In my immediately team, when I started almost everyone was highly qualified. Now I’m the most highly qualified member of the team - and I don’t actually have any relevant qualifications.
This is because of austerity; without it, I would’ve been able to train and gain qualifications. But what happened was: first the funding that would’ve trained me vanished; second was the fact that gaining qualifications would’ve put me up into the bracket for staff at risk. If I’d been more qualified they would’ve had to pay me more, and they would’ve cut my job rather than do that.

Birmingham built a brand new public library. They then had to close it most of the week because austerity cuts meant they couldn’t pay people to staff it full time.

Police numbers are down because voluntary PCSOs are cheaper. People want more actual bobbies on the beat, but that’s not possible because of austerity ecnomics.

Fire, ambulance, teachers, social workers, you look at an area and you’ll see they’ve had to adjust massively because of austerity cuts.

It doesn’t matter what other problems or issues the public sector might have. Austerity has had a massive, massive impact. And very often, what can be seen as a problem now can be traced back to an austerity decision.

Mandatory pension contributions are a good thing, and an example of gaining in what you’re paying for.

I’ve already explained why if you factor council tax into it you’ll find that’s actually because of austerity.

The majority of welfare is pensions and health. Bringing that down is not going to make the savings you think it will.