@chrisgiles.ft.com
Economics Commentator, Financial Times; Honorary Professor of Practice, UCL Policy Lab Sign up to my central banks newsletter here https://ep.ft.com/newsletters/subscribe?newsletterIds=6501cc9ec6e3c91c18b0b9e6
This is the key thing... If we want to do this sensibly, we need to look at sensitivities to assumptions rather than say, especially to young people, "you're screwed, sorry"
That's why the FAI paper is so useful (clearly I just highlighted one aspect)
Clearly not - the default isn't to freeze allowances and thresholds, but raise them with CPI. So (checking OBR spreadsheet) there is an implicit 1.83% annual decline in value - roughly halving them in real trms over 50 years (but that goes way further than necessary)
Me too!
I know I must have been told, but presumed otherwise becasue OBR specifically says it is following government policy (and it isn't)
Precisely - and T/Y doesn't have to increase that much - what I found surprising though was that fiscal drag does it alone... with room to spare and that it wasn't in the baseline
(I mean at some point I knew that, but OBR specifically presents this incorrectly)
This is just the most incredible chart...
if the UK government implements current policies on taxes and benefits, public debt is stable (contrary to what the OBR always mistakenly tells us)
My column as.ft.com/r/e69f1407-e...
It is a horrible design. But it is also obviously progressive and more so than many options.
The personal allowance is too high, family and the basic rate is too low. Once we have sorted that out we can have a choice on level and threshold for higher rate tax
Rich don’t opt out, but opt to swap lower wealth now for lower repayments later.
Yes there would be a furore if everyone was charged extra tax, especially if they hadn’t opted in, knowing the system
My column
Everyone loves progressive tax changes in theory but seem to hate them when they face the consequeuences
One for UK graduates on Plan 2 loans to read...
as.ft.com/r/d9c65a3c-1...
A prospective government could make that case. And try to get elected on it. Might be popular.
But older generations might say they should pay less because they won’t live as long because the state hasn’t given us that advantage. And that might be even more popular
That is not how government spending is distributed
There are problems with some of the analysis below but it is broadly correct. www.ons.gov.uk/peoplepopula...
You don’t get charged RPI+3 at the threshold
True. I sadly know the income distribution rather well and know I am rich on pretty much any definition.
I am not sure it entrenches inequality much since it reduces inheritance (and investment returns have been v high recently).
But it is the inequality that people really object to. And house prices are mostly to blame here
Lots of things about age is unfair. In my generation, the vast majority were excluded from higher education
It’s neither. Has loan and tax elements. The interest rate features were designed to add progressivity
You didn’t have to pay it. University was a choice your generation had which wasn’t available to the vast majority in mine
I know this can be annoying, but in my generation the vast majority of young people were excluded from higher education.
And remember there are overlapping generations- Gen X people have kids of university age
Say that to the pensioners complaining about the withdrawal of winter fuel allowance. Wish we had that number of readers
High income at £53k when people have a RPI+3 interest rate. An accurate understanding of the wage distribution
All of those in essential not highly paid jobs will not pay their loans back and outstanding amounts will be written off.
We have possibly underestimated the amount a notional debt demoralises people, but they should ignore it
Except give as much money to their children as they otherwise would have done, because they spent it on university fees and maintenance
Remember - those from rich families don't just get it for free - they will have lower inheritance or gifts from parents than otherwise
Or is your complaint that some people were born into wealthier families?
It's progressive among those that have had the government pay the fees.
Graduates who have paid the fees up front and non-graduates are clearly exempt - neither benefitted from the government paying their university fees.
That is why the repayments have elements of a loan and a tax
No - it fully understands that all UK student loans have elements of a tax (in the repayment amounts), a loan (if you repay fully, no more repayments) and something else entirely (in the write-off terms)
It is the high and stepped up interest rate that ensures progressivity as the article states
My column
Everyone loves progressive tax changes in theory but seem to hate them when they face the consequeuences
One for UK graduates on Plan 2 loans to read...
as.ft.com/r/d9c65a3c-1...
It's tempting to say the US is following the Australian economic path...and inflation will follow labour market tightening
Much too tempting
My newsletter
www.ft.com/content/1fab...
Why reliable data matters in one picture
The UK's productivity performance is either:
- still rubbish; or
- improving greatly after a terrible spell
You choose
Thank you!
Very much looking forward to getting back to my roots
Amid all the political volatility and fighting, want a good news UK story?
The BoE has found a constructive way to have a bust up in public...
it works
www.ft.com/content/0786...