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[mertle]

Osem one problem with that that is EXPENSIVE britain. At current we would never compete even if we cut our national spending to the bone.

The land and property prices so grossely inflated beyond any reasonable sense.

The government got options devalue it might not be popular but we got to consider driving those prices down. London and the south been huge culprit with it commuter belt pricing. So wages have to follow in line sp people not just afford morgages but even just to rent property around place of work. To cap it companies end up paying over the odds too.

Blame successes of governments to not keep the housing market and estate agents in line. Some will say aha its only the value that people willing pay but it seems all its done shove wages higher estate agents see more milking and it keeps spiralling out of control.

The rest of the country now see also prices starting get silly even in predominant poorer areas. I saw terraced house where usually it was 50k I am now seeing 100k and one in not brilliant area 160k. You would be bananas to buy terraced 160k when you get semi or detached or bungalow similar priced better location.

It just crazy greed.

I think many people would agree on the point about the cost of housing. It has become utterly ridiculous. Not sure you can blame estate agents though, I think the people with the actual money to spend are the ones who have been happy to push prices ever higher. As a nation we have become used to the idea that we can expect to make endless profit by working our way up the property ladder. Some have observed that house prices are the one part of the economy where everyone seems to think that rampant inflation is a good thing.

Originally Posted by mertle

Osem one problem with that that is EXPENSIVE britain. At current we would never compete even if we cut our national spending to the bone.

The land and property prices so grossely inflated beyond any reasonable sense.

The government got options devalue it might not be popular but we got to consider driving those prices down. London and the south been huge culprit with it commuter belt pricing. So wages have to follow in line sp people not just afford morgages but even just to rent property around place of work. To cap it companies end up paying over the odds too.

Blame successes of governments to not keep the housing market and estate agents in line. Some will say aha its only the value that people willing pay but it seems all its done shove wages higher estate agents see more milking and it keeps spiralling out of control.

The rest of the country now see also prices starting get silly even in predominant poorer areas. I saw terraced house where usually it was 50k I am now seeing 100k and one in not brilliant area 160k. You would be bananas to buy terraced 160k when you get semi or detached or bungalow similar priced better location.

It just crazy greed.

i would agree that house prices are a driving factor for higher wages therefore higher prices but without actualy forcing prices down with capping i can't see what we can do about that because so many people use there homes to either obtain credit or as a pension fund

[Osem]

Originally Posted by mertle

Osem one problem with that that is EXPENSIVE britain. At current we would never compete even if we cut our national spending to the bone.

The land and property prices so grossely inflated beyond any reasonable sense.

The government got options devalue it might not be popular but we got to consider driving those prices down. London and the south been huge culprit with it commuter belt pricing. So wages have to follow in line sp people not just afford morgages but even just to rent property around place of work. To cap it companies end up paying over the odds too.

Blame successes of governments to not keep the housing market and estate agents in line. Some will say aha its only the value that people willing pay but it seems all its done shove wages higher estate agents see more milking and it keeps spiralling out of control.

The rest of the country now see also prices starting get silly even in predominant poorer areas. I saw terraced house where usually it was 50k I am now seeing 100k and one in not brilliant area 160k. You would be bananas to buy terraced 160k when you get semi or detached or bungalow similar priced better location.

It just crazy greed.

There's little doubt property prices are too high but given the large proportion of debt linked directly to them, driving prices lower will result in negative equity. Furthermore, many people have scrimped and saved over the years to own their houses as some form of security and asset for their old age - they won't be too happy about that asset being significantly and deliberately devalued. Stock market uncertainty, low interest rates and doubts about the security and value of personal/private pensions all add up to make property a more appealing long term investment and I know plenty of people who've ploughed money into property to provide what amounts to a pension or security blanket in the event of redundancy.

[Ignitionnet]

mertle, given your comment about how things would all be fine if companies would pay their taxes do you have any comment on the link I posted, or the very simple fact that none of these companies are engaging in illegal tax evasion and have paid the taxes that are due?

Or that >70% of company taxes are paid by customers and staff, as noted by that link?

[Traduk]

The article, in the third paragraph, does highlight the expectation that the shortfall in income will be taken up by increased personal debt which implies that people will rather borrow than accept a lower living standard.

If that assumption is the basis for Osborne's hopes for private sector growth then he needs to do a 101 course on mass human psychology. The opposite is the most likely effect with people taking austerity measures on the nose and through fear going beyond that and salting a little away for the many rainy days to come.

The more dire consequences are that the "hoped for" resurgence in the private sector will not take off at all but may sink with the public sector cuts and more importantly the public mood will become bitter and resentful. Bitter people who have been compelled to go from prosperity to austerity are militant people in the making and the TUC turnout shows that many are well on the way to bitterness. Give it time and we will not be able to keep up with the number of concurrent strikes.

We are not an island unto ourselves when it comes to economics and our fate may well lie in what the USA does when their QE phase ends in 12 weeks time. The expectation is that interest rates will start on the path back to reality and the default is that we will be compelled to follow. If that comes to pass then the pressure on mortgage payers will be excruciating and the natural reaction is higher pay demands.

An awful lot of the coalition's ideas are based on little more than "hopes" based on static expectations in a dynamic world. They have lasted thus far because their policies were phased but now have to face the potential wrath of the public in the May local elections and possibly icy cold winds blowing from the USA later in the Summer. Labour who by default should never govern again must be quietly confident that they will get back in on a protest vote long before the 5 years are up.

Nothing is logical in this life and as was commented when the ideas were put forward. The public can talk the talk but will they walk the walk, the answer is a resounding no, they never have nor ever will.

[Stuart]

Originally Posted by Chris

I think many people would agree on the point about the cost of housing. It has become utterly ridiculous. Not sure you can blame estate agents though, I think the people with the actual money to spend are the ones who have been happy to push prices ever higher. As a nation we have become used to the idea that we can expect to make endless profit by working our way up the property ladder. Some have observed that house prices are the one part of the economy where everyone seems to think that rampant inflation is a good thing.

I am not sure how to phrase this, but I've always thought that artificially high house prices are a bit of a lie. They make you think you are wealthier than you are.

The problem is that while it may be true that (for example) you bought your house for £60,000 and it's worth £260,000 now, so on paper you are £200,000 better off, if you actually move, you'll probably find that other houses have increased by a similar amount (unless you move to a cheaper area), so you've actually made little or no profit, or even a loss after you take into account solicitor's fees.

The only time you might actually be generally better off if is if you actually buy another house. That way, you actually can capitalise on rising house prices because you don't have to buy another to replace it if you should sell it.

How many people can afford to do that though? Not that many thanks the high house prices.

[mertle]

Originally Posted by Stuart

I am not sure how to phrase this, but I've always thought that artificially high house prices are a bit of a lie. They make you think you are wealthier than you are.

The problem is that while it may be true that (for example) you bought your house for £60,000 and it's worth £260,000 now, so on paper you are £200,000 better off, if you actually move, you'll probably find that other houses have increased by a similar amount (unless you move to a cheaper area), so you've actually made little or no profit, or even a loss after you take into account solicitor's fees.

The only time you might actually be generally better off if is if you actually buy another house. That way, you actually can capitalise on rising house prices because you don't have to buy another to replace it if you should sell it.

How many people can afford to do that though? Not that many thanks the high house prices.

You hit nail on the head there its false economy its likes to make you believe that your 200k home is money in the bank. The only people to get benefit is those who down size ie 4 bedroom house to 2 or 1 as family grown up fled the nest.

I think its all been driven by few who shown by buying and selling property they become millionaires. I read somewhere a couple had done 26 moves to go up the ladder to make the million tag but its rare.

So question is how much impact would devaluation do would the benefits outway the negativies. Problem is the perception that we all would lose money but the fact those moves would be cheaper as house prices take a hit.

Yes Osem the economy is on mortgage lending not sure its right way either. There needs to be balance which makes the country as whole less expensive. Maybe people do use it to fund pensions.

Problem is we dont address it do nothing where will the country be in 20 years. Wages will have to spirral to compete with the upturn of mortages but the problem is rental occomodation tends to follow as either private landlords or council/housing assoc try recoup there outlay.

In reality people got into mortgage lending when theyre income levels dont support it but who created the moto every one should own there home.

I think this legacy also pushed the market beyond breaking point something goto give for sure.

Ignitionnet not ignoring you sorry that link maybe they did get figures wrong but net result is they still had to chase them for money owed.

Its about time business paid there way how many small firms go to the wall because big business fail to pay. Those who dont go bust they end up trying to goto small claims courts. Big businesses have horrendious atitudes when it comes to paying up its debt. They also know governments/businesses can be reluctant to take them to court and end up settling out of it. Again it still dont make it morally right.

The other example on Green not good one just because he used clever accountants to negate his tax obligations abusing loopholes dont make it right.

There too many loopholes to cheat and many if not all need shutting.

[Ignitionnet]

Originally Posted by mertle

Ignitionnet not ignoring you sorry that link maybe they did get figures wrong but net result is they still had to chase them for money owed.

Its about time business paid there way how many small firms go to the wall because big business fail to pay. Those who dont go bust they end up trying to goto small claims courts. Big businesses have horrendious atitudes when it comes to paying up its debt. They also know governments/businesses can be reluctant to take them to court and end up settling out of it. Again it still dont make it morally right.

The other example on Green not good one just because he used clever accountants to negate his tax obligations abusing loopholes dont make it right.

There too many loopholes to cheat and many if not all need shutting.

They didn't chase them for money owed, there was a dispute about how much was owed.

Vodafone set aside 2bln in the event they had to pay the full amount. They were doing what a company is supposed to do, legally maximising shareholder returns. In this instance there was a legal ambiguity which HMRC didn't want resolved as it will likely cost them a lot of money if it's resolved against them.

Why are small businesses going to the wall because of larger ones? The entire country doesn't run on the proceeds of taxation and we, from the biggest company to most individuals, pay far too much tax. Small companies have their own tax wheezes just as large ones do though obviously at lower scales.

The economy isn't based around government, or shouldn't be anyway, that the previous government decided to make it that way and the fallout shows just how utterly broken that model is.

You've gone back to the old 'fallback'. About how it's 'morally right' for them to pay more tax. It might be, but given your complaints about costs and the noting that at least 70% of that extra tax will be born directly by these companies' customers and employees I would suggest the only morally right thing to do is for government to stop troughing, get out of the way, let those who want to work and become wealthy get wealthy, get those who don't want to work into work whether they like it or not by ensuring that welfare doesn't reward laziness (Welfare To Work) and use the wealth generated to take care of those who cannot work while minimising the tax burden and ensuring people have more money to spend and invest.

TLDR: It's not my fault some stupid girl decided that becoming a baby factory was a viable career, or that some illiterate numb nuts didn't pay attention at school, I shouldn't be footing the bill either directly or indirectly via a 3rd party for their Sky TV.

---------- Post added at 13:03 ---------- Previous post was at 13:00 ----------

Originally Posted by mertle

I think its all been driven by few who shown by buying and selling property they become millionaires. I read somewhere a couple had done 26 moves to go up the ladder to make the million tag but its rare.

One big driver was Gordon Brown's raid on pensions making investment in property, rather than traditional pensions, an apparently viable way of saving for retirement. http://www.thisismoney.co.uk/pension...5&in_page_id=6

Taxation once again screwing things up.

[mertle]

Ignitionnet I dont mind people getting rich but the have duty to provide jobs this where we seen big imbalances all over this country. Jobs have been cut not because not being affordable but to maximise greed. There needs to better incentives to make private sector create the jobs the country needs.

There is also not enough manufacturing industry we got imbalance to service industry too. Lots of consumer led industry which relies on people create jobs to spend for goods/food etc.

I think this why rightly the purge to public sector jobs to balance it but also have to solve why it happen in firstplace. It happened to elevate the slack from private sector job cutting. Effectively the motto getting people off the dole into jobs. Problem is you have to give them a wage so the balance again is wrong too many public sector jobs caused our mess. I also think there issue about paying top up wages to low paid family credit to company staff which those companies could easily offord to pay the going rate themselves. Maybe means test the credit to whether companies can pay minimum wage. Regulate the situation fine companies who dont to the line.

The problem is this not just labour fault its been every govenent ignored the warnings. Every government stuck there head in the sand hoping it would go away passing the buck hoping it would not blow up on there watch.

Yes there all to blame for the fiasco in housing market believing a false economy that it would boom and boom without the consequences of the future.

Its not rocket science that if your housing is too expensive to competitive market then it has knock ons. That is companies has to push prices up as they have to give sensible wages even cut staff to pay bigger wages. Then have less chances to compete against rising countries on the up where labour cost much lower due to living in shacks. Brown was an idiot to suggest it but analysists, papers and governments before and since ignored the problems that out of control housing market would create. Everyone was guilty.

[Stuart]

Originally Posted by mertle

Ignitionnet I dont mind people getting rich but the have duty to provide jobs this where we seen big imbalances all over this country. Jobs have been cut not because not being affordable but to maximise greed. There needs to better incentives to make private sector create the jobs the country needs.

The trouble there is that there are a few companies (Tesco, BT, HSBC etc) who have a tendancy to threaten the government if the government does something they don't like. Fairly certain that forcing them to employ more staff would be one of those things.

There is also not enough manufacturing industry we got imbalance to service industry too. Lots of consumer led industry which relies on people create jobs to spend for goods/food etc.

Another problem is that the government (in the 80s) encouraged companies to move their manufacturing operations abroad, apparently meaning for the UK to rely on service industries to finance our economy.

Then, the Government in the 90s encouraged outsourcing of a lot of service industries. Note: I don't think any government overtly encouraged anyone to outsource, but the Governments of Margaret Thatcher and John Major make it a lot easier to outsource manufacturing, and the government of Tony Blair apparently made a lot of changes to the law to make it easier to outsource services.

The problem is this not just labour fault its been every govenent ignored the warnings. Every government stuck there head in the sand hoping it would go away passing the buck hoping it would not blow up on there watch.

Yes there all to blame for the fiasco in housing market believing a false economy that it would boom and boom without the consequences of the future.

The problem is that successive governments did just use the house prices to tell people how well the economy was doing. All the time they were doing this, there was no will to reduce prices (it would have made the economy look like it failed).

Even now, I don't think any government could do anything to massively reduce the price. Certainly not if it wants to survive until the next election. They've spent so long telling people that the value of their house is a good indicator of how wealthy are that any attempt to reduce that value (even by 10%) would be enough to pretty much guarantee someone launching a no-confidence vote.

Its not rocket science that if your housing is too expensive to competitive market then it has knock ons. That is companies has to push prices up as they have to give sensible wages even cut staff to pay bigger wages. Then have less chances to compete against rising countries on the up where labour cost much lower due to living in shacks. Brown was an idiot to suggest it but analysists, papers and governments before and since ignored the problems that out of control housing market would create. Everyone was guilty.

Add to that the cost of Land. All those workers are going to need somewhere to work, and the house prices are driving Land prices up as well.

[Chrysalis]

Scenarios.

1 - cut spending brutally and lower taxes, ignition's idea. This is a one way street to recession, economies grow on spending, cutting public spending will shrink it. Tax cuts mean spending has to be cut even further to balance the books. This will mainly course a disproportionate gain to the wealthy. After all taxation is enforced spreading of wealth for the benefit of the majority.
2 - maintain spending and taxes, sounds ok except there is a deficit to fix so not viable long term.
3 - increase spending and taxation. Taxation would have to increase more than spending to balance the deficit, could be doable with income tax increases as they are very low compared to historical levels. Would likely trigger a recovery but could have longer term consequences.
4 - increase spending and reduce taxation. Fast track to IMF

Of course a number of basic problems need fixing, if these get fixed somewhow then the rest will fall in place.

1 - wages falling behind living costs, so basically 'real' inflation exceeding income levels. This has been a problem for a decade or more at least, hence the reliance on debt to get through life.
2 - unbalanced economy and investment, certian parts of the country clearly significantly more wealthy than others and this is not been helped by certian areas been a magnet for investment and others not touched.
3 - unregulated capitalism. Its basic maths. If someone gets richer, then someone else is getting poorer at the same time. There is limited money supply which means there is no such scenario where everyone wins. If you track the wealth of billionaires during recessions it is not uncommon to see them see large growth during those periods in comparison to booms. I am not calling for communism, but its clear there needs to be a manipulated shift of some form to transfer wealth from the few rich to the majority poor.

All of this is unlikely to be fixed and especially #3, so government's choose a easy cop out. They make credit easier and as such introduce new money so the rich can see their growth without giving it to the poor, instead the poor just borrow so they can spend. Notice how governments consider it a priority to get things right for the banks to loan out again, thats how they see a recovery.

[Ignitionnet]

Not quite as oversimplified as some of your points but the basic premise, that cutting public spending and taxation is a one way street to recession, is incorrect.

Economies should grow on production of goods and services more than spending, money being taken in tax isn't being spent efficiently but is funding whatever overheads are required to collect and distribute it along with overheads on the services that it may or may not be used to provide. It is precisely that dependence on spending that you are advocating that was the cause of the bust - as a country we weren't producing we were just spending what we had, then what we didn't have.

If the 'majority poor' want to become wealthier we aren't totally averse to social mobility here - I was raised by my grand parents, one a bar maid the other a truck driver, and am typing this from my hideously overpriced flat in Twickenham's Riverside district.

I absolute don't see why the money I have worked to earn, and worked my way up through my career path to earn, should be redistributed to those who either can't be bothered to work or don't wish to better themselves. The state should supply a safety net to ensure a standard of living, it is absolutely not its job to ensure the rich are less rich that will only result in the poor becoming poorer.

So dealing with the 4 scenarios you mentioned objectively:

1 - Would cause pain in the very short term while private sector investment lagged however would in short-medium term and beyond result in higher growth and everyone being wealthier, just as happened with Thatcher whether we may like it or not all demographics were better off at the end of her tenure. Wealth tends to lead to more wealth, that's the way of things. The biggest thing that can be given to those who are poor is opportunity.
2 - Unviable. A public sector of >50% of the economy will slow growth - note how the previous government's 'growth' was basically all public sector and asset bubble. Crowding out the private sector while using their money to fund the crowding doesn't work.
3 - Would be an incredibly bad idea. Due to much increased levels of competitiveness and mobility among the work force excessively high income tax rates would likely lead to a loss of revenue as those paying the most are able to most easily leave or make alternative lower tax arrangements for their earnings. The income tax base has been shrunk and already our taxation rate, if you include the income tax in disguise that is National Insurance, is quite high enough thank you.

I don't like the idea of simply giving those who are less rich money in the name of equality. It seems quite obvious we come from very different points of view on this - as someone whose wealth, entirely earned through work, you advocate redistributing I'm inevitably not going to agree. The tax man eats 37% of my income from my pay slip and then some more of it that would be in my pocket from employer's NI - over 3% more.

Putting it another way we're in the first week of April - I still haven't earned enough to pay my tax bill for this calendar yet, will take me until May.

I would also suggest that a major problem that needs fixing is the amount of long term unemployed who are intentionally so, and a welfare state that offers little motivation to attempt to find employment to many and promotes being a baby factory as a career with decent earnings and housing prospects.

---------- Post added at 17:23 ---------- Previous post was at 17:17 ----------

Originally Posted by Chrysalis

All of this is unlikely to be fixed and especially #3, so government's choose a easy cop out. They make credit easier and as such introduce new money so the rich can see their growth without giving it to the poor, instead the poor just borrow so they can spend. Notice how governments consider it a priority to get things right for the banks to loan out again, thats how they see a recovery.

Or they want the banks lending to businesses to improve their liquidity and make it easier for them to purchase the goods and services they need to operate. Sorry to ruin the socialist rant with that inconvenient fact and all that.

[Chrysalis]

the thing is it creates a false economy.

a business could run for years surviving just on overdraft's and thats what many were doing, and hence a load going bust when the bank wanted it smoney back.

debt to increase liquid assets is fine when the company has the ability to pay it back, but that wasnt the case.

you also said yourself inflation is a problem, and creating money via debts is a prime cause of inflation as everytime money is created then the value of it drops.

That applies to governments as well as businesses and individuals....