Instead, today's totally untargeted tax cuts hope to produce growth by creating over-demand in all sectors. If pursuing that strategy, paramount should be careful targeting of the largesse, accompanied by legislation to close ways that it will end in the least-useful, most harmful hands.

Johnon's govt was a bunch of adolescent chancers; this govt is children still playing in the 'Britannia Unchained' sandpit.

Posted By: fostertombut the point is, inflation is more often, in de-industrialising countries like UK, created by under-supply e.g. when imports are interrupted. So if well-targeted 'printing money' results in fairly rapid increased supply, it can be deflationary.

But in this case (a) it isn't caused by under-supply and (b) printing £ won't magically increase supply anyway. So we won't need to argue about whether it will be deflationary or not! :)

I think today's announcements are very brave. I have high confidence in that belief. I also think they are totally misguided. I don't have as much confidence in that belief. So I will have to wait and see how things turn out to see what reality teaches me. I'm in the fortunate position I can afford to do that; if I was less fortunate, I'd be very worried. But maybe it'll turn out to be an incentive to get work rather than rely on benefits. Maybe it really will increase business in the country. OTOH, I don't see anywhere that increasing productivity in the country has been addressed and I do see that as a major issue that must be dealt with very soon.

Posted By: djhBut in this case (a) it isn't caused by under-supply and (b) printing £ won't magically increase supply anyway.

I'm not so sure about this and think we need to be a bit more specific about what's being referenced. The conversation seems to be oscillating between MMT in terms of managing a whole economy and MMT/not MMT with respect to energy. MMT really is about the whole economy, but even more it is about balancing the management of ledger based, non-real resources, and real world resources and in my view it's about manipulating the non-real reources in such a way as to improved the utilisation and care of real world resources.

One thing we do know is that current inflationary pressures are being caused by under supply either as a direct result of available real resources and/or as a result of indirect supply in the form of financialisation of those real resources. In term of printing money, if this printed money is directed in the appropriate way then it would have an effect on supply - e.g. capital investment in manufacturing plants and additional employment; dare I say it one might even propose education even if that one still seems to elude the government in terms of its value.

Posted By: WillInAberdeenToday's policy might well be madness, but none of the alternatives stand up to much scrutiny either :-(

Unless you view the ones that would have supported the funneling of large-scale capital investment into RE for the past decade or so, if not more, something which I believe the exponents of MMT have suggested in hand with a different economic viewpoint. If you view it simply in terms of entrenched mainstream economic theory, then maybe they don't stand up to scrutiny, but that is not a reflection on reality, merely a theoretical lense

Posted By: WillInAberdeenIf your idea of an economic policy is to wish that somebody else had done something different ten years ago

Nah, just highlighting that the theory in the mainstream that appears to stand up to scrutiny, actually doesn't...even the one where they claim the national economy is like a household budget and national debt is like a credit card - but actually mainstream economists from the treasury and Bank of England even recognise this.

As for the current chancellor, well, what's there to say other than a bigger stride in the already headed direction. Just a bit more blatant and without the attempted smoke screens.

But from the perspective on the development of windfarms in the UK, there is yet further economic irony which points to a flawed lense. It's based on the question of where the value of those developments go.

To me the question isn't just about that we need to build more RE but that we also need to structure the development of such energy provision so that the value remains to further invest in its development or it is transferred to the primary users or beneficiaries - i.e. the UK population.

Right now the economic lense permits the value extraction to elsewhere. In some instances it is shareholders, but in several other instances it's going to economies who used the alternative lense many years ago to use money to invest in energy infrastructure in a way that didn't prioritise value extraction. For example, Vattenfall, a Swedish company wholly owned by the Swedish state, or Equinor, majority owned by the Norwegian state, or Orsted majority owned by the Danish state. I think there might be a couple of others that are owned by despotic Middle Eastern regimes where the value goes back into sovereign wealth funds but nevertheless, the investment went somewhere that would support long-term value for them.

I clearly wouldn't qualify for the role of chancellor of the exchequer as my economic policy would challenge the status quo and provide a different mechanism for long-term value based on a certain amount of real world evidence from those who thought about what they were doing and actually did it way more than 10 years ago. I certainly wouldn't be supporting idiotic policy of selling everything off to the highest bidder or in many cases rather cheaply, without any mind towards deriving value from said sale..

Posted By: JontiI expect they have high paying jobs already lined up

... and therefore want tax rates lowered

Part of the issue is the me culture. I want the Govt to.... When life was good and energy cheap, did folk invest in insulation? No they went on big holidays and bought expensive lease cars. Now they want someone else to pay for the insulation. Scrapping the Green Deal was a good thing. Why should I subsidize those who didn't invest in insulation when I did (and got no grants for it as it was a new build).

Energy - I have said for a long time that we need a price regulated volume of energy per household and after that you pay what the market demands. The current pricing model where the more you use the cheaper it becomes is just daft (Standing charge spread over over more units of power reduces effective unit price). This helps fuel poverty and consumption.

English building regs that do not mandate Solar on Residential or Commercial - easy win to mandate it.

Tax reform - where to start... Get rid of Business Rates & employers NI and replace with a levy on Vattable sales. Get rid of employee NI and make it a flat income tax rate. Raise minimum wage significantly. Tax all income, no matter the source, the same.

Build, build, build so everyone can have a roof over their head. Factory built, simple dwellings. Radically reform our building practices.

“Ask not what your country can do for you – ask what you can do for your country”

Posted By: borpinPart of the issue is the me culture. I want the Govt to.... When life was good and energy cheap, did folk invest in insulation? No they went on big holidays and bought expensive lease cars. Now they want someone else to pay for the insulation. Scrapping the Green Deal was a good thing. Why should I subsidize those who didn't invest in insulation when I did (and got no grants for it as it was a new build).

because some people live in rented accommodation so are not inclined to improve someone else's property. Some haven't skills to diy nor the finances to pay others. Some simply do not have the finances. But yes, I agree there are those who could have but then mainstream opinion was not really pushing it.

I agree entirely on your energy pricing model.

Posted By: borpin


English building regs that do not mandate Solar on Residential or Commercial - easy win to mandate it.

Tax reform - where to start... Get rid of Business Rates & employers NI and replace with a levy on Vattable sales. Get rid of employee NI and make it a flat income tax rate. Raise minimum wage significantly. Tax all income, no matter the source, the same.

Build, build, build so everyone can have a roof over their head. Factory built, simple dwellings. Radically reform our building practices.

“Ask not what your country can do for you – ask what you can do for your country”

It is interesting that you start and end by criticising the attitude of letting the state do the decision making and take action yet your entire last paragraph of solutions is just that. The state imposing on the population.

Posted By: djh

Is everybody having a roof over the their head really the problem? Or is it maybe that employment is 'unfairly' distributed? So ban London Weighting allowances and similar stuff, and continue to force the BBC and suchlike to move out of London. And yes, I'll support any moves to improve building practices, especially if they involve less carbon-intensive practices.

If you don't have a home then it is a BIG issue having a roof over. I think there is general agreement that there is a massive shortfall in housing in the UK. I also think it is obvious that whilst there is enough employment in most parts of the country a sizable chunk of that employment does not pay enough to cover general living costs. As a nation in the last 6 months we have sadly started going down the road of those with enough trying to pull up the drawbridge leaving the less well off out in the cold. The question of course for those pulling up the drawbridge is how long will it be before you too are on the wrong side of said drawbridge?

Posted By: JontiIt is interesting that you start and end by criticising the attitude of letting the state do the decision making and take action yet your entire last paragraph of solutions is just that. The state imposing on the population.

It was less critising the state forcing something, than folk expecting a handout while partying.

Posted By: djhDid the Scottish mandate it whilst I wasn't looking?

Yes Solar on roof can reduce baseload during the day (peak) significantly. The old 1% improvement rule.

Posted By: djhErr, I know Business Rates isn't good, but is increasing the VAT rate, which is what I think you're suggesting, a good or the right idea?

No, this is a levy on vattable sales. VAT works like this as a VAT registered company. I buy materials for X with Y VAT included (input VAT). I add value to those materials (hence Value Added Tax) and then sell them for A + B VAT (Output VAT). I then have to pay HMRC B-Y as the tax on the value I have added (roughly). A levy would say, you are selling A value of vattable goods (so excludes food, children's clothes etc) so I am going to impose a levy on those sales.

Advantages - no upfront payment (open a shop, you pay BR before you sell anything); unavoidable - big corporations all sell lots of Vattable goods, but hide the profits and pay less corporation tax; small office run businesses making lots of vattable sales pay the same as a factory with the same sales; no tax on investment - add a new £10M robot to your factory, your Business rates go up.

Also, HMRC already has all of the data to do this and every company is effectively VAT registered now (even small business scheme).

The levy probably only needs to be 1% or so to make up for all the BR and Employers NI.

Posted By: djhIs everybody having a roof over the their head really the problem?

Yes. the Housing Benefit costs for folk in B&B, hotels etc is atronomical. LA housing waiting lists are huge in most areas.

Posted By: JontiI also think it is obvious that whilst there is enough employment in most parts of the country a sizable chunk of that employment does not pay enough to cover general living costs.

Yes, hence the rise in Minimum Wage (by a lot). Many of the high earners would then be forced into paying more, so they get less (rather than tax and benefits). And no, putting up the minimum wage doesn't cause folk to lose their jobs.

Posted By: Peter_in_HungaryThe problem is that unless the government own the energy production and the raw materials then the difference between the regulated price and the market price has to met by the tax payer.

Not necessarily. The Price (Rate) cap has been in place quite successfully until recently. In my scheme, the suppliers simply claw back the additional costs from those that can afford it, else they use less energy!

In the present case, we are doing just this; the taxpayer funding the difference. I'd make the difference a loan to the suppliers (govt guaranteed) that then then pay back. This then locks in high prices for at least 5 years and by then it will just be the normal price.

Posted By: djhAh, you mean a sales tax?! Good idea.

Effectively (levy sounds better!) but not on the consumer. It is a business cost (we could argue if it is a fixed cost or a variable cost, a fixed variable cost perhaps).

That's why most of the world use VAT rather than sales taxes which favour huge integrated importer-retailers and disfavour networks of small local suppliers selling each other components and services.

Sales taxes are common only where they are levied by local authorities (eg US states) who lack the ability to track/levy/refund VAT on goods moving across their borders.

Posted By: WillInAberdeenThat's why most of the world use VAT rather than sales taxes

This isn't a traditional sales tax as it is not applied directly on the consumer. A sales tax usually only impact the final seller so is regarded as being a tax on the consumer.

UK has no local taxes on sales, just a tax on buildings.

But if Andy sells timber to Bob, who makes cabinets for Chris, who sells them on to Dave, who fits them as part of Eric's house-build for Fred, then 'levy' would be charged 5 times. But if Fred bought them from IKEA, only taxed once -> cost advantage to the big companies.

If the levy is on business not consumers, Andy Bob Chris Dave and Eric will do a lot of 'homers' to keep their sales personal rather than through their company.

A petrol station sells £100000 of petrol and makes 0.5% markup on each sale. A pub sells £1000 of meals and makes 50% markup, so the exact same income from 100x less sales. Would the petrol station pay 100x as much levy as the pub?

VAT came in because it avoids those problems.

TBF there's problems with business rates too (favouring online/WFH industries over office/factory/shop industries).

(Crossed post with DJH)

Posted By: WillInAberdeenBut if Andy sells timber to Bob, who makes cabinets for Chris, who sells them on to Dave, who fits them as part of Eric's house-build for Fred, then 'levy' would be charged 5 times.

But all of those businesses are paying this *instead* of business rates and employers NI. In addition, when they buy a new machine for their shop, their rates don't go up until they produce more cabinets.

Posted By: WillInAberdeenBut if Fred bought them from IKEA, only taxed once -> cost advantage to the big companies.

But that big company probably, as a proportion of it's sales pays less tax (business rates & Employers NI) for the same level of ecconomic activity. If that tax burden is increased, the advantage swings back to the others.

Posted By: WillInAberdeenA petrol station sells £100000 of petrol and makes 0.5% markup on each sale. A pub sells £1000 of meals and makes 50% markup, so the exact same income from 100x less sales. Would the petrol station pay 100x as much levy as the pub?

But the pub gains as it will be paying proportionally less tax per £1 of sales than in currently does. The tax the business pays is based on their economic activity not on the size of their building.

Posted By: WillInAberdeenTBF there's problems with business rates too (favouring online/WFH industries over office/factory/shop industries).

Exactly. No system is perfect, but this would help leveling the field between physical and online as both would pay the same tax for being in business.

Posted By: djhIt's a means of discouraging startups. It will always be cheaper for a firm to source materials or parts from within itself rather than use a sub-contract supplier, because the sub-contract operation is penalised by the tax.

No it encourages it. One of the main disincentives is the fact Business Rates are due when you sign the lease, before you sell anything. It isn't the source where the cost lies, but selling it back on. so the person who sold you the materials has paid the levy. You then pay it, when you sell on what you have made, but it replaces Business rates and everyone pays the same rate big or small, lots of employees or very few, big buildings or small. The levy is based on their economic activity.

So the wholesale electricity price seems to have fallen back to 'normal'.

Last week was the cheapest electricity for more than a year, since before the suppliers started going bust and before Ukraine.

The wholesale price has even gone negative on several nights this month when it was windy and people were getting paid to consume the excess electricity.

So is that the end of the energy price crisis, or just a lull? Will the gov price cap now be reduced in line with the wholesale price? Anyone care to speculate what's going on here ?!?