It's a fairly standard response from LotO. It's a toughgig to respond to the budget. This one perhaps more so given some of the tanks placed on Labour's lawn.
Both Tony Blair and William Hague said, Budget Day was the most difficult parliamentary experience for them as Leader of the Opposition.
The fun thing about budgets is that because they're secret until they're announced, on-message people only have a few minutes to reverse their message when the government snaffles an opposition policy.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
Something to remember, £9/hr by 2020 isn't that much over an inflation rise in minimum wage every year.
2014 NMW: £6.50/hr
6 years at say 3% inflation (High side estimate) = £7.76
A fair bit over actually.
£9/hr only for over 25s though.
So basically it is just another band to the minimum wage. I would prefer to see it based upon time worked. Seems highly unfair that somebody joins the workforce at 16, works hard, gets trained and 3 years later an employer can still pay them £6.50.
Those are minimum wages, not targets or the amounts expected for trained workers.
I know, but we know what has happened and does happened with any of these things. It becomes the level of the ceiling give or take a bit.
Out of interest, I took a look last week at random jobs in the local paper across a wide variety of sector just out on interest and they all had something in common, £6.50/hr.
A lot of jobs put in the local paper are unskilled/starter jobs though.
Yes, sure, but we know there has been a real affect that minimum wage has anchored the top end of pay for unskilled and semi-skilled jobs. I am just saying that employers if they want can take on 16 years old and never pay them any more until 25.
It might also have a perverse affect that 25 year olds become less attractive to employ.
That's untrue. There are step changes at 16/18/21 and now 25. So a 16 year old gets an automatic pay rise after 2 and then another 3 years respectively.
There'll be acres of wailing and gnashing from Polly. But by 2020 the facts on the ground will be well established. The UK will be a freer, more competitive, more self reliant place.
Delighted that everyone now believes the Living Wage is a good idea. How swiftly views change, eh? If the Tories implement Labour policies that's not a problem for me.
Companies will be happy to pay higher wages if taxes are cut which is the balance Osborne strikes.
Expecting companies to pay higher wages while increasing their taxes (as Ed proposed) was bonkers.
Big difference. Lower taxes = higher wages.
If companies willingly paid higher wages in return for lower corporation tax a compulsory living wage would not be necessary.
This is a good and very welcome move. Ditto on non-doms, ditto on BTR.
I said a while back that Osborne towers over all other Tory (and Labour, to be fair) politicians. Today proved that. I don't agree with his political views, but I do admire his ability to play politics and to set the political landscape. He is a rare example of a politician learning on the job. The contrast to the early years of the Coalition is marked.
Something to remember, £9/hr by 2020 isn't that much over an inflation rise in minimum wage every year.
2014 NMW: £6.50/hr
6 years at say 3% inflation (High side estimate) = £7.76
A fair bit over actually.
£9/hr only for over 25s though.
So basically it is just another band to the minimum wage. I would prefer to see it based upon time worked. Seems highly unfair that somebody joins the workforce at 16, works hard, gets trained and 3 years later an employer can still pay them £6.50.
Those are minimum wages, not targets or the amounts expected for trained workers.
I know, but we know what has happened and does happened with any of these things. It becomes the level of the ceiling give or take a bit.
Out of interest, I took a look last week at random jobs in the local paper across a wide variety of sector just out on interest and they all had something in common, £6.50/hr.
A lot of jobs put in the local paper are unskilled/starter jobs though.
Yes, sure, but we know there has been a real affect that minimum wage has anchored the top end of pay for unskilled and semi-skilled jobs. I am just saying that employers if they want can take on 16 years old and never pay them any more until 25.
It might also have a perverse affect that 25 year olds become less attractive to employ.
That's untrue. There are step changes at 16/18/21 and now 25. So a 16 year old gets an automatic pay rise after 2 and then another 3 years respectively.
I knew there was a step change, but I thought it was just 18. I meant to say employers taking people on at 18. But you are right, I stand corrected.
I still don't really like minimum wage based solely on age.
There'll be acres of wailing and gnashing from Polly. But by 2020 the facts on the ground will be well established. The UK will be a freer, more competitive, more self reliant place.
This is a HUGE budget. It does two things: 1. The centre ground has moved significantly towards 'sound money' macro-economics; and 2. The individual benefits as the state retreats, shifting expectations of what you get vs what you give.
There'll be acres of wailing and gnashing from Polly. But by 2020 the facts on the ground will be well established. The UK will be a freer, more competitive, more self reliant place.
The centre ground on wages has however shifted significantly to the left. Nobody is arguing that the free market will take care of the low paid anymore.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
It is the fall in unemployment that has allowed George to produce this move on the NMW. A fair argument against NMW always was that it could increase unemployment. With the rosy statistics, it can be afforded to be increased above inflation.
Stephen Bush @stephenkb 10m10 minutes ago George Osborne commits to a national living wage by 2020. Sadly, the nation in question is Wales in 2014. #budget2015
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
A fair point. But a Tory government accepting he principle of a living wage is a pretty big move. Remember how opposed they used to be to even a minimum wage. If Labour is clever they will welcome this.
George Osborne really does look like someone who knows he wants to be Tory leader in a few years time.
Up to a few months ago, I always thought he'd prefer to be the Eminence Grise for the next Tory leader after Dave
More than that -- has there been a Granita-style agreement whereby the Chancellor becomes de facto Prime Minister for domestic policy while the PM handles "abroad"?
Delighted that everyone now believes the Living Wage is a good idea. How swiftly views change, eh? If the Tories implement Labour policies that's not a problem for me.
Companies will be happy to pay higher wages if taxes are cut which is the balance Osborne strikes.
Expecting companies to pay higher wages while increasing their taxes (as Ed proposed) was bonkers.
Big difference. Lower taxes = higher wages.
If companies willingly paid higher wages in return for lower corporation tax a compulsory living wage would not be necessary.
This is a good and very welcome move. Ditto on non-doms, ditto on BTR.
I said a while back that Osborne towers over all other Tory (and Labour, to be fair) politicians. Today proved that. I don't agree with his political views, but I do admire his ability to play politics and to set the political landscape. He is a rare example of a politician learning on the job. The contrast to the early years of the Coalition is marked.
Companies don't get to volunteer what their tax rates and minimum/living wage rates are. This is an exchange - cut corp tax and raise wages is roughly neutral. Increase taxes and increase wages is a double whammy.
Huge over-reaction in the share price of Berkeley IMO. Down 6%. A clear buying opportunity if you're not already exposed. The non-dom changes are not that significant.
I presume we are still having national minimum wages, rather than making regional distinctions. I can't imagine even thinking about surviving on £6.50/hr in London, but it is certainly possible in the North (albeit you will still be piss poor).
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
What was in the Labour manifesto ? Lolza !
Indeed, the minimum wage rise in Labour's manifesto was insufficient too. But they weren't freezing/cutting tax credits meaning the low-paid would still have had a (modest) rise in their income, as opposed to a cut from this budget.
This is a HUGE budget. It does two things: 1. The centre ground has moved significantly towards 'sound money' macro-economics; and 2. The individual benefits as the state retreats, shifting expectations of what you get vs what you give.
There'll be acres of wailing and gnashing from Polly. But by 2020 the facts on the ground will be well established. The UK will be a freer, more competitive, more self reliant place.
The centre ground on wages has however shifted significantly to the left. Nobody is arguing that the free market will take care of the low paid anymore.
George Osborne really does look like someone who knows he wants to be Tory leader in a few years time.
Up to a few months ago, I always thought he'd prefer to be the Eminence Grise for the next Tory leader after Dave
More than that -- has there been a Granita-style agreement whereby the Chancellor becomes de facto Prime Minister for domestic policy while the PM handles "abroad"?
I think Cameron will go in 2018, which will help Osborne.
I think being an incumbent Prime Minister will help the Tories in 2020, and Dave knows that too.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
A fair point. But a Tory government accepting he principle of a living wage is a pretty big move. Remember how opposed they used to be to even a minimum wage. If Labour is clever they will welcome this.
Tbh, as critical as I often am of Labour, I don't think they'll find it that difficult to oppose this at all. All they need to do is wait for the IFS analysis showing the low-paid will get income drops, call it a "strivers' tax" or whatever and then go from there.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
But they will be earning their way rather than having their wages topped up by the government. It is a highly desirable change.
Why tax people and then give it back to them via means tested benefit, better just to pay them more in the first place.
The biggest losers are people who plan to have big families after 2017, the winners are undoubtedly the low paid who don't claim benefits.
Delighted that everyone now believes the Living Wage is a good idea. How swiftly views change, eh? If the Tories implement Labour policies that's not a problem for me.
Companies will be happy to pay higher wages if taxes are cut which is the balance Osborne strikes.
Expecting companies to pay higher wages while increasing their taxes (as Ed proposed) was bonkers.
Big difference. Lower taxes = higher wages.
If companies willingly paid higher wages in return for lower corporation tax a compulsory living wage would not be necessary.
This is a good and very welcome move. Ditto on non-doms, ditto on BTR.
I said a while back that Osborne towers over all other Tory (and Labour, to be fair) politicians. Today proved that. I don't agree with his political views, but I do admire his ability to play politics and to set the political landscape. He is a rare example of a politician learning on the job. The contrast to the early years of the Coalition is marked.
Companies don't get to volunteer what their tax rates and minimum/living wage rates are. This is an exchange - cut corp tax and raise wages is roughly neutral. Increase taxes and increase wages is a double whammy.
None of which demonstrates that businesses would voluntarily raise wages in the wake of a CT cut alone.
The other interesting thing from today's budget. George Osborne really does look like someone who knows he wants to be Tory leader in a few years time. Up to a few months ago, I always thought he'd prefer to be the Eminence Grise for the next Tory leader after Dave
I think I suggested sometime before the last election that if the Tories won then it would be Osborne who would be favourite to be next leader. This is assuming he would like the job. Lets remember that the next leader will have to fight the next election and if he lost he would not be leader for long. What is important in respect of the next election is the expectation of the public and probably even now the expectation is that the tories will be winners.
It is quite clear that Yvette Cooper is the real shadow chancellor. Chris Leslie looking at her every few seconds for approval. It's always difficult for the opposition to respond to budgets but over the years Labour's response has been dire. This one is no exception. It's hard to believe they have been listening to the same budget.
Jo Coburn looks as though she has swallowed 'several' wasps. Now over to WIMBLEDON.
The Living Wage is pure sound bite student politics. The whole concept stinks like a '60s income policy.
True, but bear in mind that the prices and incomes policy in the 1960s and 1970s was seen by a majority of parliamentarians as a sensible, moderate and reasonable measure.
Harriet's response is like someone who has just witnessed Pearl Harbour - and chooses to focus on the noise pollution on a Sunday morning.....
Only about the National Living Wage.... ;-)
Kevin in line for a junior ministerial job any time soon ?
It didn't come from Kevin! Someone a little closer to the process (and probably saying more than he should under purdah).
It was certainly thought that this would be politically significant, as an embodiment of One Nation Conservatism, especially in the SW where so many people are on the minimum wage. Hard to see how the LibDems get any traction down here now...
Conservatives cheering the poor getting a pay rise - detoxification complete.
Well, technically that will only be the case if areas which have almost no votes for the Tories start increasing the Tory share, even if they don't win there, but as an issue it makes it harder to make the toxic point, on the face of it.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
A fair point. But a Tory government accepting he principle of a living wage is a pretty big move. Remember how opposed they used to be to even a minimum wage. If Labour is clever they will welcome this.
Tbh, as critical as I often am of Labour, I don't think they'll find it that difficult to oppose this at all. All they need to do is wait for the IFS analysis showing the low-paid will get income drops, call it a "strivers' tax" or whatever and then go from there.
If they oppose a national living wage they would be even more stupid than I think they are. That does not mean to say they cannot oppose cuts that will do substantial damage to the poorest and most vulnerable. But Labour has to talk for more than them if it is ever to win again - and rightly so.
George Osborne really does look like someone who knows he wants to be Tory leader in a few years time.
Up to a few months ago, I always thought he'd prefer to be the Eminence Grise for the next Tory leader after Dave
More than that -- has there been a Granita-style agreement whereby the Chancellor becomes de facto Prime Minister for domestic policy while the PM handles "abroad"?
In fantasy mode: Maybe a Granita-style agreement between the Queen and Cameron to stop Charles whereby Cameron becomes the first constitutional President while Osborne takes over the running of government.
Delighted that everyone now believes the Living Wage is a good idea. How swiftly views change, eh? If the Tories implement Labour policies that's not a problem for me.
Companies will be happy to pay higher wages if taxes are cut which is the balance Osborne strikes.
Expecting companies to pay higher wages while increasing their taxes (as Ed proposed) was bonkers.
Big difference. Lower taxes = higher wages.
If companies willingly paid higher wages in return for lower corporation tax a compulsory living wage would not be necessary.
This is a good and very welcome move. Ditto on non-doms, ditto on BTR.
I said a while back that Osborne towers over all other Tory (and Labour, to be fair) politicians. Today proved that. I don't agree with his political views, but I do admire his ability to play politics and to set the political landscape. He is a rare example of a politician learning on the job. The contrast to the early years of the Coalition is marked.
Companies don't get to volunteer what their tax rates and minimum/living wage rates are. This is an exchange - cut corp tax and raise wages is roughly neutral. Increase taxes and increase wages is a double whammy.
None of which demonstrates that businesses would voluntarily raise wages in the wake of a CT cut alone.
I didn't say they would, I said Osborne struck a good balance - whereas the alternative the Opposition proposed of higher taxes plus higher costs was not balanced.
But of course having a level playing field means not just that costs are higher but that customers have higher incomes. If anything its slightly inflationary (and I think we can do with a bit more inflation currently when its zero).
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
What was in the Labour manifesto ? Lolza !
Indeed, the minimum wage rise in Labour's manifesto was insufficient too. But they weren't freezing/cutting tax credits meaning the low-paid would still have had a (modest) rise in their income, as opposed to a cut from this budget.
Won't people on minimum wage see their income tax threshold go up? Also the tax credits withdrawal won't affect anyone currently claiming and will in future reduce credits to people on higher incomes than the minimum wage. The only negative change will be to those having more children in the future.
With these changes to corporation tax/living wage/tax credits it kind of feels that the Government is shuffling money round in a circle
Low paid employees gain from companies due to living wage hike The Government gains from low paid employees due to tax credit reductions Companies gain from the Government due to reduced corporation tax.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
What was in the Labour manifesto ? Lolza !
Indeed, the minimum wage rise in Labour's manifesto was insufficient too. But they weren't freezing/cutting tax credits meaning the low-paid would still have had a (modest) rise in their income, as opposed to a cut from this budget.
Won't people on minimum wage see their income tax threshold go up? Also the tax credits withdrawal won't affect anyone currently claiming and will in future reduce credits to people on higher incomes than the minimum wage. The only negative change will be to those having more children in the future.
Cuts in Corp Tax are superb news. Hope this gets the right level of coverage.
Which Western countries have rates lower or equal to 18%?
As I've said before, George has been very canny - insisting that the world rallies around the taxing of large global corporations SOMEWHERE - and then offering to be that somewhere with the lowest levels of corporation tax....
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
A great many on minimum wage do not receive tax credits.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
A great many on minimum wage do not receive tax credits.
And all of them just for a hike in Income Tax thresholds.
This is an enormously important budget. Most of the next five years' politics are set out in it.
Well I got that right. And the increase in the NMW. And that the benefits cuts would be even larger than had been announced. And the £1m (effectively) for Inheritance Tax. And the attack on HB.
But I really thought he would be able to accelerate the elimination of the deficit. Instead balance is postponed yet again. It shows how deep our structural deficit was and is. Reducing this deficit is incredibly hard work.
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
With 5 grand of tax free dividends and tax free cash savings interest ISAs have no basically become pointless except for those who've been stashing away the max for years.
With these changes to corporation tax/living wage/tax credits it kind of feels that the Government is shuffling money round in a circle
Low paid employees gain from companies due to living wage hike The Government gains from low paid employees due to tax credit reductions Companies gain from the Government due to reduced corporation tax.
Sort of. What's happening is the Government is stopping a circle. Previously companies were taxed, employees were taxed, employees got money back in tax credits.
Cuts in Corp Tax are superb news. Hope this gets the right level of coverage.
Which Western countries have rates lower or equal to 18%?
As I've said before, George has been very canny - insisting that the world rallies around the taxing of large global corporations SOMEWHERE - and then offering to be that somewhere with the lowest levels of corporation tax....
If the EU is smart it will try to harmonise it's corporation tax rate to 18% too. Seeing as most people at or near the top are gravy training Luxembourgers, they won't.
You guys do realise that £9 an hour is not a living wage, and that the low-paid are likely to still face drops in their incomes after the tax-credit cuts, right?
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
I feel your pain. Do you want Labour to vote against it then?
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
The test of how effective Osborne has been will be in how many years we stay in surplus when we finally reach it. It's not much good rushing to achieve a surplus if you're forced into a rapid fiscal reversal as soon as trouble hits.
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
The test of how effective Osborne has been will be in how many years we stay in surplus when we finally reach it. It's not much good rushing to achieve a surplus if you're forced into a rapid fiscal reversal as soon as trouble hits.
No the whole point of running a surplus is in order to be able to run a deficit when you're in trouble. That is sound economics.
What would be bad is if we reach a tiny surplus then start running deficits again in good times.
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
The test of how effective Osborne has been will be in how many years we stay in surplus when we finally reach it. It's not much good rushing to achieve a surplus if you're forced into a rapid fiscal reversal as soon as trouble hits.
I agree.
As I said the last 6 years now have shown how deep a hole we were in. To have a deficit 12 years after the crash assumes an extremely long economic cycle. There is absolutely no question we will go into the next downturn with debt at at least double the level it was in 2007 as a share of GDP. This is not good and the Brown legacy.
@DPJHodges: Chris Leslie currently on TV explaining that as a result of winning the election George Osborne has been forced to accept Labour was right.
@ToryTreasury: Bizarrely, Labour seem to be opposing the National Living Wage.
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
The test of how effective Osborne has been will be in how many years we stay in surplus when we finally reach it. It's not much good rushing to achieve a surplus if you're forced into a rapid fiscal reversal as soon as trouble hits.
No the whole point of running a surplus is in order to be able to run a deficit when you're in trouble. That is sound economics.
What would be bad is if we reach a tiny surplus then start running deficits again in good times.
According to the IMF, we have the worse cyclically adjusted deficit in the developed world.
But we shouldn't worry too much about the symbolic nature of a surplus. The key is reducing debt-to-GDP. If we assume 2.5% GDP growth through the cycle, and 1.5% inflation, that means that the budget deficit needs to (approximately) be less than about 3.5% through the cycle. If we can achieve that, we will see UK debt-to-GDP gently gliding down towards the 75% level on a 10 year view.
It is quite clear that Yvette Cooper is the real shadow chancellor. Chris Leslie looking at her every few seconds for approval. It's always difficult for the opposition to respond to budgets but over the years Labour's response has been dire. This one is no exception. It's hard to believe they have been listening to the same budget.
Jo Coburn looks as though she has swallowed 'several' wasps. Now over to WIMBLEDON.
BRITISH tennis ace Murray takes first set against Canada's Pospisil!
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
The test of how effective Osborne has been will be in how many years we stay in surplus when we finally reach it. It's not much good rushing to achieve a surplus if you're forced into a rapid fiscal reversal as soon as trouble hits.
No the whole point of running a surplus is in order to be able to run a deficit when you're in trouble. That is sound economics.
What would be bad is if we reach a tiny surplus then start running deficits again in good times.
According to the IMF, we have the worse cyclically adjusted deficit in the developed world.
But we shouldn't worry too much about the symbolic nature of a surplus. The key is reducing debt-to-GDP. If we assume 2.5% GDP growth through the cycle, and 1.5% inflation, that means that the budget deficit needs to (approximately) be less than about 3.5% through the cycle. If we can achieve that, we will see UK debt-to-GDP gently gliding down towards the 75% level on a 10 year view.
Both assumptions are optimistic. Within 10 years I'd expect a recession (its already six years since the last one ended so that's 16 years) so 2.5% isn't likely. Inflation is currently zero.
Furthermore I'd view 75% as too high anyway. Ideally I'd like to see our debt-to-GDP ratio back around 40% - however there's plenty of economic evidence that a debt ratio over 70% has a negative impact on long term growth. We need to get back below that and aim to reduce it further, not accept 75% as OK only to then see it explode above 100% next time there's a crash.
Comments
Don't let that get in the way of your 2012-esque spin at what a genius Osborne is, though.
http://www.theguardian.com/commentisfree/2015/jul/07/right-love-higher-wages-tax-credits
After today, nothing less than an extended break at the Tusken Villa will cheer her up...
This is a good and very welcome move. Ditto on non-doms, ditto on BTR.
I said a while back that Osborne towers over all other Tory (and Labour, to be fair) politicians. Today proved that. I don't agree with his political views, but I do admire his ability to play politics and to set the political landscape. He is a rare example of a politician learning on the job. The contrast to the early years of the Coalition is marked.
I still don't really like minimum wage based solely on age.
George Osborne really does look like someone who knows he wants to be Tory leader in a few years time.
Up to a few months ago, I always thought he'd prefer to be the Eminence Grise for the next Tory leader after Dave
George Osborne commits to a national living wage by 2020. Sadly, the nation in question is Wales in 2014. #budget2015
I think being an incumbent Prime Minister will help the Tories in 2020, and Dave knows that too.
Why tax people and then give it back to them via means tested benefit, better just to pay them more in the first place.
The biggest losers are people who plan to have big families after 2017, the winners are undoubtedly the low paid who don't claim benefits.
I don't like the terminology either - but it stopped a lot of huffing in its tracks.
What is important in respect of the next election is the expectation of the public and probably even now the expectation is that the tories will be winners.
Jo Coburn looks as though she has swallowed 'several' wasps. Now over to WIMBLEDON.
The voters are going to love it.
It was certainly thought that this would be politically significant, as an embodiment of One Nation Conservatism, especially in the SW where so many people are on the minimum wage. Hard to see how the LibDems get any traction down here now...
But of course having a level playing field means not just that costs are higher but that customers have higher incomes. If anything its slightly inflationary (and I think we can do with a bit more inflation currently when its zero).
Which Western countries have rates lower or equal to 18%?
Low paid employees gain from companies due to living wage hike
The Government gains from low paid employees due to tax credit reductions
Companies gain from the Government due to reduced corporation tax.
But I really thought he would be able to accelerate the elimination of the deficit. Instead balance is postponed yet again. It shows how deep our structural deficit was and is. Reducing this deficit is incredibly hard work.
It now looks increasingly likely that George will never have a surplus as Chancellor. He deserves better.
Now companies pay wages.
Which is a more sensible and simple system?
What would be bad is if we reach a tiny surplus then start running deficits again in good times.
As I said the last 6 years now have shown how deep a hole we were in. To have a deficit 12 years after the crash assumes an extremely long economic cycle. There is absolutely no question we will go into the next downturn with debt at at least double the level it was in 2007 as a share of GDP. This is not good and the Brown legacy.
@ToryTreasury: Bizarrely, Labour seem to be opposing the National Living Wage.
But we shouldn't worry too much about the symbolic nature of a surplus. The key is reducing debt-to-GDP. If we assume 2.5% GDP growth through the cycle, and 1.5% inflation, that means that the budget deficit needs to (approximately) be less than about 3.5% through the cycle. If we can achieve that, we will see UK debt-to-GDP gently gliding down towards the 75% level on a 10 year view.
Furthermore I'd view 75% as too high anyway. Ideally I'd like to see our debt-to-GDP ratio back around 40% - however there's plenty of economic evidence that a debt ratio over 70% has a negative impact on long term growth. We need to get back below that and aim to reduce it further, not accept 75% as OK only to then see it explode above 100% next time there's a crash.
new thread