Economics Nerd Central

[How bad boy]

Looks like Labour are rowing back on the income tax rise. Good.

The press are fucking hilarious with it:





AAAAAAGGGGGGHHHHH




Time to panic indeed.

 

[How bad boy]

And now that the terrifying budget has been published, the response from the markets has been...

U.K. 30 Year Gilt - 5.227%​

U.K. 10 Year Gilt - 4.44%​

FTSE100 is up 0.77%

Which is...meh.

Let's check in to see how the Telegraph is taking it:



Not well.

 

[Bennyton]

And now that the terrifying budget has been published, the response from the markets has been...

U.K. 30 Year Gilt - 5.227%​

U.K. 10 Year Gilt - 4.44%​

FTSE100 is up 0.77%

Which is...meh.

Let's check in to see how the Telegraph is taking it:

View attachment 45860

Not well.

That's the thing about British people, while they are generally fucking stupid enough in many ways, in particular they are financially retarded, so it's sort of the governments fault that their populace are lapping this up.

I did a lot of work with a company called Gohenry to push for a financial literacy programme for kids, so they could learn about compound interest, etc.

After 8 years of lobbying, it's being adopted, finally.

And HBB, your kids are welcome M8, may they learn how interest carries before they end up in negative equity.

 

[How bad boy]

That's the thing about British people, while they are generally fucking stupid enough in many ways, in particular they are financially retarded, so it's sort of the governments fault that their populace are lapping this up.

I did a lot of work with a company called Gohenry to push for a financial literacy programme for kids, so they could learn about compound interest, etc.

After 8 years of lobbying, it's being adopted, finally.

And HBB, your kids are welcome M8, may they learn how interest carries before they end up in negative equity.

I can guarantee my sons will understand interest rates, inflation and NPV... But thank you anyway, you're right, everyone should understand this shit.
Fiscal drag from not changing thresholds is a very significant effective rise in income tax and that compounds over the years.


The salary sacrifice move is a pretty big effective tax rise on high earners, especially for folks just over various tax thresholds. I think that salary sacrifice is a fucking idiotic policy anyway, allowing people to effectively declare a lower salary than they get. And yes, I do use it, so will probably end up paying more tax.

 

[Ogre Moran]

I can guarantee my sons will understand interest rates, inflation and NPV... But thank you anyway, you're right, everyone should understand this shit.
Fiscal drag from not changing thresholds is a very significant effective rise in income tax and that compounds over the years.


The salary sacrifice move is a pretty big effective tax rise on high earners, especially for folks just over various tax thresholds. I think that salary sacrifice is a fucking idiotic policy anyway, allowing people to effectively declare a lower salary than they get. And yes, I do use it, so will probably end up paying more tax.

I don't understand how younger folks can't get their heads around basic financial literacy: making ends meet, keeping costs down, understanding that there is no free lunch. The phrase "cutting your cloth to measure" sums up the wisdom of older generations.

Anyway, the UK is definitely in a pickle. Those at the top are heavily taxed and those on lower incomes much less so. The Tories brought this about so the Torygraph can't be complaining. Reeves has a difficult task but invariably a fiscally unsustainable position has to be addressed by tough medicine and one then hopes that prospects improve.

 

[Bennyton]

I don't understand how younger folks can't get their heads around basic financial literacy: making ends meet, keeping costs down, understanding that there is no free lunch. The phrase "cutting your cloth to measure" sums up the wisdom of older generations.

Anyway, the UK is definitely in a pickle. Those at the top are heavily taxed and those on lower incomes much less so. The Tories brought this about so the Torygraph can't be complaining. Reeves has a difficult task but invariably a fiscally unsustainable position has to be addressed by tough medicine and one then hopes that prospects improve.

I suppose most of my experience is from friends in London, but an awful lot of them have fucked off entirely since 2017.

A Lot of people are now making the decision to leave before starting a family, because there's zero help if you're a high earner. (over 60k or over 100k)

for childcare in London, like one child in a creche, you're talking 2500 - 3000 pcm.

Say you're making a big salary, like 125k, you'd expect to be on the pigs back basically.

Starting from monthly take-home pay for £125k

gross salary after Tax and NI(PRSI): £6,798

Childcare for 1 kid in a creche, Zone 3 : £2,750
£6,798 − £2,750 = £4,048
Tube - Zone 3 - £228
£4,048 − £228 = £3,820
Mortgage for a two bed flat (Rent would be maybe 40% higher for the same flat) £1800
£3,820 − £1,800 = £2,020/month net left over

Then you've council tax0200-400 pcm), power(60-120), water(40-60), gas(80-120), broadband, tv, streamers, health insurance, etc, all before the biggest expense: food.

London is mad expensive like, £20 spent on a lunch wouldn't be mad at all, this sort of salary looks amazing on paper, but it wouldn't leave you with much at all.

Then you get to primary school, do you send your kids to a shite school, or pay for a slightly better one?

They call it the rat race for a reason I suppose, but I can see why people are leaving.

This would put you in the top 1-3% of people too, these people are the lucky ones.

 

[How bad boy]

I don't understand how younger folks can't get their heads around basic financial literacy: making ends meet, keeping costs down, understanding that there is no free lunch. The phrase "cutting your cloth to measure" sums up the wisdom of older generations.

Anyway, the UK is definitely in a pickle. Those at the top are heavily taxed and those on lower incomes much less so. The Tories brought this about so the Torygraph can't be complaining. Reeves has a difficult task but invariably a fiscally unsustainable position has to be addressed by tough medicine and one then hopes that prospects improve.

The UK fiscal situation isn't even vaguely as bad as the right wing press make out, e.g.

https://bsky.app/profile/mrjamesob.bsky.social%2Fpost%2F3m6lz5qu5jc2b

Yes debt to GDP, at 94.5% is high. But it's stable.

Reeves is forecasting it'll come down, the "fiscal headroom" is the protection against estimates being off, she raised that from £10bn to £20bn. They're forecasting a surplus by 2028. Whether or not that's achievable...


I'm confident that the multiplier on a lot of the extra spending on this budget is positive.

As an example, with the 2 child cap lifted, that's a lot of money into households who really need it, it will get spent. And that spending boosts the economy, it goes into local businesses who hire or retain more staff, pay more income taxes, more VAT and those staff spend more money in the rest of the economy. There's half a million families in poverty who will need every penny.


Some of the tax raising measures, such as removing tax relief for cash ISAs above £12k are positive for GDP, in GDP figures, saving like that is a negative, just buying dumb interest only cash does zero to benefit the economy and who has £1k a month to lob into savings?
The salary sacrifice measures help the highest paid most and they're the ones with the lowest propensity to spend. Instead of subsidising EVs for people on £100k+ by over 60%, maybe spend that money on someone who needs every penny? I'd like a cheap EV (of my employer offered the scheme, but they don't...), but I really think it's wrong just how much of a discount the highest paid get for one, when the poorest have to pay full price. There will be an impact there, but I'm not sure it's going to hit the UK economy particularly hard, certainly not compared to the multiplier benefit from the 2 child cap being lifted.


The OBR does not break fiscal multipliers down by decile for their impact of tax or spend policies, which I think is a major oversight. There's a lot of research that says the "Marginal Propensity to Consume" for higher income deciles is much lower than poorer deciles. That makes sense, you give a hundred quid to a rich person, they may or may not spend it, might save a decent chunk of it. Give it to a poor person and you can guarantee that'll be spent quickly. The inverse is true too, take money away from high income people and it won't make a huge difference to their spending, but take it away from low income people, it will.

I'm confident that extra spending will boost the economy, so I think those GDP estimates are too generous. Perhaps I'm being too kind to Labour but I really think that was generally a good budget, but the media are incredibly hostile without justification.

 

[How bad boy]

I suppose most of my experience is from friends in London, but an awful lot of them have fucked off entirely since 2017.

A Lot of people are now making the decision to leave before starting a family, because there's zero help if you're a high earner. (over 60k or over 100k)

for childcare in London, like one child in a creche, you're talking 2500 - 3000 pcm.

Say you're making a big salary, like 125k, you'd expect to be on the pigs back basically.

Starting from monthly take-home pay for £125k

gross salary after Tax and NI(PRSI): £6,798

Childcare for 1 kid in a creche, Zone 3 : £2,750
£6,798 − £2,750 = £4,048
Tube - Zone 3 - £228
£4,048 − £228 = £3,820
Mortgage for a two bed flat (Rent would be maybe 40% higher for the same flat) £1800
£3,820 − £1,800 = £2,020/month net left over

Then you've council tax0200-400 pcm), power(60-120), water(40-60), gas(80-120), broadband, tv, streamers, health insurance, etc, all before the biggest expense: food.

London is mad expensive like, £20 spent on a lunch wouldn't be mad at all, this sort of salary looks amazing on paper, but it wouldn't leave you with much at all.

Then you get to primary school, do you send your kids to a shite school, or pay for a slightly better one?

They call it the rat race for a reason I suppose, but I can see why people are leaving.

This would put you in the top 1-3% of people too, these people are the lucky ones.

That price for a kid in creche is silly expensive but I suppose it's London.

£125k isn't a big salary in London any more.

Now out in Reading, which is only 23 mins from Paddington on the fastest train, that creche would be £2k, the train travel would be more like £500 a month (assuming £6k annual train pass), but you can get a two bed flat for a lot less than in central london, could buy one with a nice river view within a few mins walk of the station for £390k. Or rent a 3 bed house round the corner from me for £1600. And the primary schools are both pretty good and free.

Without the kid in an insanely expensive creche, they've got £4,770 left over a month. Which isn't exactly poverty.

The other thing you should do with that calculation is add a second income to the household, which massively changes the dynamics

Kids and housing are insanely expensive in the UK, that's at least as big an issue as the marginal tax rate being pretty high. Incidentally, the person in the example is paying a total tax rate of 35.6%


If you do the same calculation for someone in Ireland with an income of €143k, their monthly disposable income is €7,314k according to a PWC calculator
That's £6408, so the raw tax rate in Ireland is actually higher for someone on that income.

 

[Bennyton]

That price for a kid in creche is silly expensive but I suppose it's London.

£125k isn't a big salary in London any more.

Now out in Reading, which is only 23 mins from Paddington on the fastest train, that creche would be £2k, the train travel would be more like £500 a month (assuming £6k annual train pass), but you can get a two bed flat for a lot less than in central london, could buy one with a nice river view within a few mins walk of the station for £390k. Or rent a 3 bed house round the corner from me for £1600. And the primary schools are both pretty good and free.

Without the kid in an insanely expensive creche, they've got £4,770 left over a month. Which isn't exactly poverty.

The other thing you should do with that calculation is add a second income to the household, which massively changes the dynamics

Kids and housing are insanely expensive in the UK, that's at least as big an issue as the marginal tax rate being pretty high. Incidentally, the person in the example is paying a total tax rate of 35.6%


If you do the same calculation for someone in Ireland with an income of €143k, their monthly disposable income is €7,314k according to a PWC calculator
That's £6408, so the raw tax rate in Ireland is actually higher for someone on that income.

Right, but in Ireland you'd receive something for your money, I suppose that's the critical difference.

Childcare costs capped at €295 per week, or €800-900 per month.

Child allowance is t means tested, the schools are generally much better if you've a neuro typical kid, etc.

Even Dublin would represent better value than London at this stage.

 

[How bad boy]

Right, but in Ireland you'd receive something for your money, I suppose that's the critical difference.

Childcare costs capped at €295 per week, or €800-900 per month.

Child allowance is t means tested, the schools are generally much better if you've a neuro typical kid, etc.

Even Dublin would represent better value than London at this stage.

You're right on the benefits.

The school stuff varies. There are parts of the UK where the schooling is excellent, almost all the primary schools within about 1.5 miles of where I am are rated excellent*.

Free secondary schools are meh, but there's an outstanding grammar school if your kids are smart enough to get in, about a fifth of students get into Oxbridge.

Ireland has done very well in PISA tests recently, so I think it's likely your average Irish secondary school is better. Ireland was outstanding in reading, only behind Singapore, and 11th in both maths and science. UK is 14th (maths), 15th (science) and 13th (reading), so a bit behind but not exactly a disaster. For comparison, Finland was touted as the the one to emulate a few years back, but it slipped a lot, 20th in maths, 9th in science and 14th in reading.
It's between Ireland and Estonia for which European country has the best performing secondary education based on the latest PISA rankings...