Thursday, 15 May 2008

That Tax Cut: Some Arithmetic

Taking our cue from the Denninger piece cited below, we can do some simple sums.

22 million or so lowish and middle-earners have just been given a tax cut – up to £ 120 per person. Recall that in recent months a number of public-sector pay rises were held back by around half a percent – for example, the police were awarded 1.9% instead of the 2.5% recommended by the review body – because to pay the full amount would be inflationary, according to Brown and Darling.

If we take £ 24 k as a representative salary for many of these workers, 0.5% x 24 k is £ 120, so the amounts are commensurate.

OK, so we know this week’s tax rebate is inflationary, and the government has acknowledged it will borrow to fund it. What impact might that have on interest rates ? Well, at very least it must make another of those quarter-percent reductions much less likely. Take a middle-income family with a mortgage of £100,000: 0.25% on an interest-only basis is £ 250 more interest to pay. Per annum.

May not be much of a bargain, this one-off tax cut.



Anonymous said...

Very True. The Tories ran into real trouble in the 1980's.

They kept doing a 1p off income tax but inerest rates were rising ten - fifteen percent. The 1p tax cut was as nothing to a % off the rates.

Anonymous said...

thats nonsense. how can you factor against an interest rate cut that doesnt exist.
look at the MPC voting patterns, they were pretty reluctant to cut rates in the face of the credit crunch. various members have been warning about inflation for most of the year. regardless of the tax cut stunt, i dont think we'd have seen another rate cut this summer anyway

Steven_L said...

How much did you say Nick? £24k? I'm on £21k and I benefitted from the 10% scrapping. You have to be under £18k to have lost out from that I gather. Even though I won on it I still don't agree, although I'm dead against these tax credit thingys - they are the real issue that will hamper UK over the next decade.

On another note CU is as quiet as the media was about this huge RBS fall today. If you're out there CU I share your pain, I had a pocket-money size short on them last week at 366 when I heard they were printing more shares and chickened out at around 353 when it didn't look like it was going to budge as quickly as my roulette conditioned mind wanted to believe it would.

Now I'm pondering whether 275 is a good price to buy and know that if I don't and they rebound I'll be gutted all over again!

Nick Drew said...

Roy - fair enough, but I was just illustrating the 'directional' logic - and irony - of accepting Brown's dictum on suppressing public-sector wages. If he is in any way right on that, a quarter-percent is the smallest quantum to consider.

Steven - yes, where is CU when we need him?! (Relaxing, I hope) So you've added shorting to your armoury ! I seem to recall discussing that several months ago.

Good call on RBS (see my short post of Tues) but I think the big fall was just the automatic effect of the dilution when they issued the new shares (the clue is the absolutely vertical drop).

Otherwise I think Peston would have been blogging by now ! We shall ask CU whether he participated in the rights issue ...

Mark Wadsworth said...

It's great stuff for people who have sold to rent!

Nick Drew said...

PS, Roy

May 15 (Bloomberg) -- U.K. two-year government bonds dropped the most in 12 years this week as traders abandoned bets the Bank of England will cut interest rates next month ...

Nick Drew said...

boasting again, Mark !

we have all doffed our caps already at your masterly decision

Anonymous said...

I think it is quite interesting how this 10p tax vcut rate thingy has dominated the headlines. It does seem to play into Labour's hands, to be honest. The fact is that the Daily Mail is reporting REAL food inflation running at about 16%. Monthly mortgage repayments have also risen by a similar amount. That is costing the average family of four about £250 A MONTH more! So quibbling over £120 a year is laughable really. Too many people in the media and politics are earning so much money that they don't notice inflation.

Anonymous said...

Sorry, in my last post that should have been £150 a month, not £250 a month.

Letters From A Tory said...

Good spot. The teachers and police officers must be fuming about this, although they haven't been in the media talking about it. Future interest rate rises to curb inflation will wipe out this tax gain very quickly.

Bill Quango MP said...

Fisrt question to J. Smith on 5 live yesterday was about the police pay.

This from the comments:
I am amazed that a Home Secretary can claim with a straight face, that it would be wrong to backdate police pay at a cost of £200 per officer, because this would promote inflation, but its a good thing to give 21 million people £120 this year to spend to put, her word, some "Oomph" into the economy!!

She was lucky the debate moved on because the first two callers were calling her on this.

As an aside the Post Office has insisted on 2.1% for all Post Office staff IN LINE WITH INFLATION!
[perhaps they mean In Line with this MONTH's increase in inflation]

CityUnslicker said...

I bought RBS at 400, more fool me. Still you can't win 'em all!

Steven_L said...

'Armoury' Nick? You're having a laugh, I've added cfd gambling to my list of bad habits, it now takes pride of place above staggering into casinos, spontaneous bouts of binge drinking on the way home from work, smoking, biting my nails and picking my nose, not washing my clothes until there is 3 machine loads and not eating breakfast.

If I had hung onto that short I'd be back up. I lost £1,200 in the first week I started just 2 months ago and by the time I chickened out of RBS had wormed my way back to £120 down or so.

A Bad call on Sainsbury's and now it's £300 down. Still, it's taking longer to lose all my cash than it usually takes me in the casino.

The people that run the stock markets obviously didn't take ill-disciplined gamblers like me who wake up tipsy from the night before into account when they decided what time to open up shop.

I missed Carphone Warehouse too, I was thinking about shorting them for weeks, for no other reason than I don't like the buggers, which I decided wasn't a good enough reason. Next thing you knew they'd crashed too.

Nick Drew said...

staggering into casinos, spontaneous bouts of binge drinking on the way home from work, smoking, biting my nails and picking my nose, not washing my clothes until there is 3 machine loads and not eating breakfast

you are the Prime Minister and I claim my £5

(this explains those gold sales !)

Steven_L said...

If I was PM I'd break the stagnation of the left/right politcal divide by introducing a system of 'gamblism'.

A friend and I discussed this in a curry house early one Saturday morning.

FSA regulations that impede consumer choice would be abolished, a new kind of national lottery would be made compulsory (unless you want to live on the street) and the voter would have the choice, through a voucher system, whether they gambled this months credits on Texas Hold-em, fixed odds games of random chance or the financial markets.

The stock markets would become more volatile and unpredictable as purchasing power fluctated from one type of consumer to the next winner on a periodical basis.

Gamblism is the only way to revitalise our politcial system and tired economy if you ask me.

Anonymous said...

Thanks to the blog owner. What a blog! nice idea.

Anonymous said...

aaaa片, 免費聊天, 咆哮小老鼠影片分享區, 金瓶梅影片, av女優王國, 78論壇, 女同聊天室, 熟女貼圖, 1069壞朋友論壇gay, 淫蕩少女總部, 日本情色派, 平水相逢, 黑澀會美眉無名, 網路小說免費看, 999東洋成人, 免費視訊聊天, 情色電影分享區, 9k躺伯虎聊天室, 傑克論壇, 日本女星杉本彩寫真, 自拍電影免費下載, a片論壇, 情色短片試看, 素人自拍寫真, 免費成人影音, 彩虹自拍, 小魔女貼影片, 自拍裸體寫真, 禿頭俱樂部, 環球av影音城, 學生色情聊天室, 視訊美女, 辣妹情色圖, 性感卡通美女圖片, 影音, 情色照片 做愛, hilive tv , 忘年之交聊天室, 制服美女, 性感辣妹, ut 女同聊天室, 淫蕩自拍, 處女貼圖貼片區, 聊天ukiss tw, 亞亞成人館, 777成人, 秋瓷炫裸體寫真, 淫蕩天使貼圖, 十八禁成人影音, 禁地論壇, 洪爺淫蕩自拍, 秘書自拍圖片,

做愛的漫畫圖片, 情色電影分享區, 做愛ㄉ影片, 丁字褲美女寫真, 色美眉, 自拍俱樂部首頁, 日本偷自拍圖片, 色情做愛影片, 情色貼圖區, 八國聯軍情色網, 免費線上a片, 淫蕩女孩自拍, 美國a片, 都都成人站, 色情自拍, 本土自拍照片, 熊貓貼圖區, 色情影片, 5278影片網, 脫星寫真圖片, 粉喵聊天室, 金瓶梅18, sex888影片分享區, 1007視訊, 雙贏論壇, 爆爆爽a片免費看, 天堂私服論壇, 情色電影下載, 成人短片, 麗的線上情色小遊戲, 情色動畫免費下載, 日本女優, 小說論壇, 777成人區, showlive影音聊天網, 聊天室尋夢園, 義大利女星寫真集, 韓國a片, 熟女人妻援交, 0204成人, 性感內衣模特兒, 影片, 情色卡通, 85cc免費影城85cc, 本土自拍照片, 成人漫畫區, 18禁, 情人節阿性,

Anonymous said...

情色電影, aio交友愛情館, 言情小說, 愛情小說, 色情A片, 情色論壇, 色情影片, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊美女, 視訊交友, ut聊天室, 視訊聊天, 免費視訊聊天室, a片下載, av片, A漫, av dvd, av成人網, 聊天室, 成人論壇, 本土自拍, 自拍, A片, 愛情公寓, 情色, 舊情人, 情色貼圖, 情色文學, 情色交友, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 色情遊戲, 情色視訊, 情色電影, aio交友愛情館, 色情a片, 一夜情, 辣妹視訊, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊, 視訊美女, 美女視訊, 視訊交友, 視訊聊天, 免費視訊聊天室, 情人視訊網, 影音視訊聊天室, 視訊交友90739, 成人影片, 成人交友,

免費A片, 本土自拍, AV女優, 美女視訊, 情色交友, 免費AV, 色情網站, 辣妹視訊, 美女交友, 色情影片, 成人影片, 成人網站, A片,H漫, 18成人, 成人圖片, 成人漫畫, 情色網, 日本A片, 免費A片下載, 性愛, 成人交友, 嘟嘟成人網, 成人電影, 成人, 成人貼圖, 成人小說, 成人文章, 成人圖片區, 免費成人影片, 成人遊戲, 微風成人, 愛情公寓, 情色, 情色貼圖, 情色文學, 做愛, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 寄情築園小遊戲, 色情遊戲, 情色視訊,