Interest rates to fall more slowly due to Rachel Reeves’s budget
Inflationary pressures of Labour’s budget mean that the cost of borrowing is likely to fall just twice next year, according to traders
This means that the interest bill on the government debt will be higher – for decades. Billions higher per year even.
That household analogy does, in fact, work. As debt grows as a percentage of income then so does the interest rate – leading to, at some point, that spiral.
Doesn’t matter, as long as train drivers get a pay rise.
The Sainsbury’s CEO says the NI rise will cost the company £140 million. Sainsbury’s most recently reported profit was £137 million.
I wonder how many companies will start to use pension salary sacrifice as a way around this. A number of companies have done this for years, but I suspect it will happen a lot more.
Which begs the question: How much money will this raise in practice?
For a country to produce high levels of taxation, it also needs high levels of productivity. The Nordic model works (ish) because the state pays for stuff but doesn’t actually do the stuff. This means that the stuff that is done is done efficiently. Even the French are better at this than we are.
The way the British economy is structured with services provided by government employees cannot stand as high a tax burden as countries where there is less dead weight to carry.
So: @salamander a little bit in the short term, although nowhere near what’s expected, but in the longer term the unemployment bill will outstrip any extra revenue by the government trying to take a larger slice of a smaller cake. Of course, we’ll then get “tax gap analysis” showing that people are evading taxes, but the truth is that people can’t give the government money that the it’s already taken off them. Lower take-home pay -> less spending -> less VAT collected as a simple example.
“ Which begs the question: How much money will this raise in practice?”
Not forgetting to deduct unemployment benefits or other benefits claimed by those who lose their jobs because of this policy.
I doubt ideologues like TTKs mob care if it raises money. It makes them feel good. They’re sticking it to the “rich” (in their imagination).
This means that the interest bill on the government debt will be higher – for decades. Billions higher per year even.
Those tokens of value the interest is paid in must go to the lenders. So doesn’t this end up as a net transfer of wealth from the have nots to the have lots?
Salamander:
‘I wonder how many companies will start to use pension salary sacrifice as a way around this’.
..it works to an extent, but if you (say) opt to put all of your salary into your pension via salary sacrifice, HMRC jumps in and reminds that it is illegal to pay anyone less than the minimum wage, and employers NI will be payable over £5000, ie roughly 400 hours a year
BnW @ 2.12s surely it’s not that the employer is not paying minimum wage, it’s that the employee is declining to take it immediately?
I very much doubt it.
The inflationary impact of the budget will already have made itself felt by the first quarter of 2025 and the MPC will hold fire on any further reductions. The next moves will be up, up, up unless the striking farmers ensure that there is no food and mad Ed ensures that there’s no power.