Can we afford another lockdown?

[43066]

Am I a tax avoider if I ride a bicycle instead of driving a car?

If you’ve bought it through a cycle to work scheme, then yes. If you’ve bought it in the normal way, then no.

 

[Starmill]

Ah, I suppose if you use that definition...personally I'd call it avoidance if you avoided tax the Government really wanted you to pay, but not if you take advantage of a scheme the Government promotes, which is more the Government saying that the tax is not due (and indeed the personal allowance on savings has been whacked right up, so it isn't due on any savings for most people).

It's still wrong in this specific case because there's a huge allowance to earn interest in general savings accounts without paying tax. Hardly anyone would earn sufficient interest to have to ever pay the tax in it anyway - it just so happens that the accounts are still ISAs anyway. Abolishing the ISA allowance and also abolishing the normal tax free allowance would be required to generate any tax from most people's small cash reserve. Calling the interest allowance tax avoidance is delusional. None of this has any practical effects anyway because I'm advocating tax increases based on the money they would raise, so this one wouldn't even be considered. Some people will spout any old rubbish though in the name of wanting good public services, but refusing to pay for them.

Trying to say someone can't advocate tax rises because they have a stocks and shares ISA is a ridiculous thing to say.

It is indeed utterly crazy.

 

[robbeech]

We couldn't really afford the first lockdown.

But the government will order it out of panic, just like the first time.

Question is whether people will obey again.

I think this should read ""Question is what percentage of people would obey it a second time?"
I've spend the last 4 months watching people pushing the boundaries (often literally) because they think they're clever and can get one over on the government regardless of the outcome in terms of health of themselves and others. Maybe it is just me, but a significant number have disobeyed the rules this time, so it stands to reason that at least the same number would do next time as a starting point, add to that the number of people disgruntled by the ones that disobeyed it this time so follow suit, and the higher number of people that cannot afford to and you'll immediately get a large number.

 

[Cowley]

I suppose a gentle reminder to stay on topic might be in order...
Can we afford another lockdown?
(thanks @robbeech )
If anyone wants to start a thread about ISAs etc then I’m happy to start a new thread?

 

[Bishopstone]

Yes, if we’re willing to accept one or both of the following, over the next 5 years:

i) A burst of high inflation
ii) Sovereign default, which could well be coordinated internationally (‘our hospitals and schools are desperate for investment, so why are we paying so much of our tax revenue in interest to greedy bankers?!)

Otherwise, no. If unlimited borrowing was consequence-free, someone would have done it already and not been booted out at the ballot box, or by coup, shortly thereafter.

 

[Starmill]

Yes, if we’re willing to accept one or both of the following, over the next 5 years:

i) A burst of high inflation
ii) Sovereign default, which could well be coordinated internationally (‘our hospitals and schools are desperate for investment, so why are we paying so much of our tax revenue in interest to greedy bankers?!)

Otherwise, no. If unlimited borrowing was consequence-free, someone would have done it already and not been booted out at the ballot box, or by coup, shortly thereafter.

We don't need unlimited borrowing though. The current costs mean that the extra borrowing is only a small proportion of GDP. It could grow significantly, and GDP could fall, and the bond market would still have confidence in British bonds. In particular, almost all rich countries are running big deficits and piling on the debt. There isn't enough German or Dutch debt for everyone to buy that. There will continue to be a market for British and American bonds even with hundreds of billions more in borrowing.

Talk of default or a coup is way way down the line from the begin debt position we are in today.

 

[underbank]

Yes, if we’re willing to accept one or both of the following, over the next 5 years:

i) A burst of high inflation
ii) Sovereign default, which could well be coordinated internationally (‘our hospitals and schools are desperate for investment, so why are we paying so much of our tax revenue in interest to greedy bankers?!)

Otherwise, no. If unlimited borrowing was consequence-free, someone would have done it already and not been booted out at the ballot box, or by coup, shortly thereafter.

Difference is that most developed countries are also suffering Covid and massively damaged economies. Wealth is relative, not absolute, so if other countries are doing/suffering the same as us, the differential is unchanged, hence wealth markers such as exchange rates won't change. It would only be if the UK had a massively damaged economy, but our trading/financial partner companies were unscathed that we'd end up deep in the smell brown stuff.

 

[yorksrob]

They need to ramp up community testing so that they can discover where outbreaks are and, if necessary undertake local "lockdowns".

 

[Bishopstone]

We don't need unlimited borrowing though. The current costs mean that the extra borrowing is only a small proportion of GDP. It could grow significantly, and GDP could fall, and the bond market would still have confidence in British bonds. In particular, almost all rich countries are running big deficits and piling on the debt. There isn't enough German or Dutch debt for everyone to buy that. There will continue to be a market for British and American bonds even with hundreds of billions more in borrowing.

You’re right that there’s a market appetite for bonds at present, but I don’t share your confidence that this appetite will endure, at current yields.

Your view is the consensus opinion, I admit, and I’m a contrarian on this.

 

[Starmill]

You’re right that there’s a market appetite for bonds at present, but I don’t share your confidence that this appetite will endure, at current yields.

Your view is the consensus opinion, I admit, and I’m a contrarian on this.

I agree it certainly won't last forever. I was willing to bet that it would last just long enough for us to get the deficit back down, a year or so. In particular, though, now, I agree that because the government have delivered so appallingly our economy will take a much larger hit than the EU average. This will depress GDP much more than in other rich countries and the incompetence of the economic management will indeed be on full display in the bond market. The effects of the end of the transition and the increasing volatility of Sterling may also hinder our capability to borrow on the market.

In a weird way it might be safer to borrow as much as ever we can right now and get it out of the door before the rest of the world wakes up and realises just how badly we've actually done ourselves compared to the rest of the rich world. If yields do make a big jump, we've already lost. We should try to prevent it, and if it happens, we must turn the borrowing off.

 

[LAX54]

Currently we've only borrowed around 100% of GDP and still have an AA credit rating. Market conditions make it relatively easy for the government to borrow at a low rate, as long as there's time to react, and the Bank of England's financing facility is there to step in too if necessary.

So on the basis that the only real economic price of "lockdown" is borrowing, and that the current cost of borrowing is very low, the answer is yes. We could borrow potentially another 30- 50% of GDP in new bond issues over the coming year without seeing too much increase in refinancing cost, if done under the right conditions. Japan has exceeded 200% and through very careful market borrowing has kept yeild low. I'm not suggesting we'd need to go that far, but fundamentally the answer to the question 'can we afford pay for it?' is, almost always "yes". The question is not whether the Treasury can get its hands on the money. It is whether the Prime Minister is willing to spend it on us.

In the first 'lockdown' the government borrowed and spent a lot of money, it's true. But it also wasn't nearly enough.

Finally there's the question of future tax revenues. We've been living a lie about how much tax we must pay for years - the government can and should commit now to increase some taxes significantly; but not yet. They could announce a plan and a consultation, and look to get new measures in to significantly increase tax revenues from the 2022-23 tax year. This would give confidence to the market, and the credit rating agencies. I doubt that the Conservatives have the spine to be honest with the public though about the paramount importance of us raising more through tax.

Not only 2nd, but possibly 3rd and 4th too, it's not going anywhere, the longer we lock ourselves away, the longer it will have time to come back and bite

 

[thejuggler]

Why are so many forgetting why we went into lockdown?

The lockdown didn't cause economic harm, to think it did is so off beam its why our death numbers and infection rates will continue to be far far too many for a long time to come.

 

[underbank]

I think calling an ISA "tax avoidance" is pushing it, as it's an official Government scheme to encourage savings and investment, not a sneaky workaround.

Tax avoidance = tax planning = legal
Tax evasion = illegal
That's all there is to it.

 

[HSTEd]

The lockdown didn't cause economic harm, to think it did is so off beam its why our death numbers and infection rates will continue to be far far too many for a long time to come.

So what caused 20+% of our GDP to just vanish virtually overnight?

 

[Huntergreed]

Why are so many forgetting why we went into lockdown?

The lockdown didn't cause economic harm, to think it did is so off beam its why our death numbers and infection rates will continue to be far far too many for a long time to come.

This simply isn't true.

There was a 20.4% in national GDP in April alone, this is just one of what is now over three months of lockdown. As well as this, there have been countless businesses been forced to close, many redundancies have occurred, and we've had to spend billions on schemes such as furlough and business support to try and minimise the damage to the economy caused by the lockdown.

 

[Starmill]

So what caused 20+% of our GDP to just vanish virtually overnight?

Fear.

As it was, many were fearful because the government told them to be. Some people were already very cautious and staying at home as much as they were able. Eventually everyone would have reached their own threshold for that if nothing had been done.

A handful of people wouldn't ever have become fearful, but they're the vocal hardliners and zealots who have done everything possible to undermine the lockdown and get out and about anyway. These people will never be bothered about anyone else regardless of what happens.

The fear of the collapse of the healthcare system was a legitimate one. The government hasn't staved it off as they could, through either elimination (New Zealand) or the next best thing: testing and tracing (Germany etc).

However you square it, 'lockdown' isn't what damaged the economy. It was the only way out of permement damage. We made a mess of it - what's next is the economic price of doing so.

I've explained a thousand times and one that there's strong consensus: the only way there can be economic recovery is once the virus is controlled, and more importantly once consumers believe it is. This point isn't controversial anywhere except this forum.

 

[thejuggler]

So what caused 20+% of our GDP to just vanish virtually overnight?

Coronovirus, not lockdown.

Until you can control the virus lockdown has to remain an option.

 

[HSTEd]

As it was, many were fearful because the government told them to be. Some people were already very cautious and staying at home as much as they were able. Eventually everyone would have reached their own threshold for that if nothing had been done.

Maybe the Government shouldn't have tried to whip the population into hysteria deliberately?
Thanks to the timelag by the time anyone got scared it would already be nearly over and any hysteria could have been controlled.

The fear of the collapse of the healthcare system was a legitimate one.

But the effects of doing so were horrendously overstated.
Thanks to triage existing all that happens is the NHS puts coronavirus patients at the end of the queue, and at worst elderly people are parked in an extemporised ward on a consumer grade CPAP machine.

The ventilators-will-be-overwhelmed problem was enormously overstated given the appalling survival rates for people who were being ventilated. Especially elderly people.
Indeed I recall medical staff being very upset with ludicrous assumptions in that Ferguson paper.

However you square it, 'lockdown' isn't what damaged the economy. It was the only way out. We made a mess of it - what's next is the economic price of doing so.

The death of a quarter million to three quarters of a million people, in the worst case, almost all of them pensioners and almost all of them economically inactive, would have nothing like the impact that this madness is having.

I've explained a thousand times and one that there's strong consensus: the only way there can be economic recovery is once the virus is controlled, and more importantly once consumers believe it is. This point isn't controversial anywhere except this forum.

The Hong Kong flu killed ~80,000 in the UK and didn't even manage to kill a recession.
PEnsioners dying in larger than normal numbers is not going to collapse the economy.

Especially as a sane policy would not have involved the Government deliberately stirring fear to get htem to obey the lockdown.

Coronovirus, not lockdown.

The virus threatened state violence against anyone who dared carry on their life?

 

[Starmill]

Tax avoidance = tax planning = legal
Tax evasion = illegal
That's all there is to it.

That might be true in a way but its an oversimplification. HMRC are well known for seeking to challenge many forms of tax avoidance with extensive litigation. They win some, they lose some. They force some people to capitulate. They seek, sometimes successfully, to get tax avoidance practices reclassified as a crime. They advise government on all manner of tax outcomes. None of these applies to an ISA and yet they're still tax avoidance.

 

[Domh245]

Coronovirus, not lockdown.

Until you can control the virus lockdown has to remain an option.

And there I was thinking that it was the collapses in Retail (single biggest contribution to fall), Accomodation & Food Services (second biggest contribution to fall) that led to it, y'know - the things (mostly) mandated to shut by law. Silly me

GDP monthly estimate, UK - Office for National Statistics

Gross domestic product (GDP) measures the value of goods and services produced in the UK. It estimates the size of and growth in the economy.

www.ons.gov.uk

 

[Starmill]

And there I was thinking that it was the collapses in Retail (single biggest contribution to fall), Accomodation & Food Services (second biggest contribution to fall) that led to it, y'know - the things (mostly) mandated to shut by law. Silly me

GDP monthly estimate, UK - Office for National Statistics

Gross domestic product (GDP) measures the value of goods and services produced in the UK. It estimates the size of and growth in the economy.

www.ons.gov.uk

And what do you think the state of those businesses would have been in if the restrictions had never been put in place?

 

[Domh245]

And what do you think the state of those businesses would have been in if the restrictions had never been put in place?

Higher, because even reduced trade is better than zero trade? Is this a trick question?

 

[Starmill]

Higher, because even reduced trade is better than zero trade? Is this a trick question?

Not at all.

In both cases trade would be so low that the businesses would have closed down. So it would be the same - zero. Only if the government hadn't ordered it there would have been less protection.

 

[Huntergreed]

Not at all.

In both cases trade would be so low that the businesses would have closed down. So it would be the same - zero. Only if the government hadn't ordered it there would have been less protection.

This is actually a fair point that I’ve admittedly overlooked recently, perhaps the lockdown has, for some businesses through grants and furlough, had a positive economic impact.

 

[yorkie]

There won't be another national lockdown, no matter what. The public won't stand for it, and no government will tank the economy for a second time ...

Agreed 100%

 

[Jonny]

Trust me, the one thing that jarred the most is that many are inactive. Indeed, it is now conflated with care home deaths, which are something of a red herring because it is the responsibility of the management and staff of those organisation to protect their clients/residents...

Oh, and some of us are getting pee-d off with everyone else's over-defensiveness and thinking.

Or is there something that the Government is not telling us? Like, some ethnic groups tend to have different non-skin genes that make them more susceptible?

Why are more people from BAME backgrounds dying from coronavirus?

Health Secretary Matt Hancock has said that people from ethnic minority backgrounds are "disproportionately" dying with coronavirus.

A number of reviews, including by the Office for National Statistics and Public Health England, have now concluded that this is the case.

Suggested reasons have included existing health inequalities, housing conditions, public-facing occupations and structural racism.

(article continues)

Why are more people from BAME backgrounds dying from coronavirus?

People from ethnic minorities have been impacted more by coronavirus, but why?

www.bbc.com

So did we 'lock down' because certain ethnic groups have a higher prevalence of non-ethnicity genes that render them susceptible to the coronavirus?

 

[Starmill]

This is actually a fair point that I’ve admittedly overlooked recently, perhaps the lockdown has, for some businesses through grants and furlough, had a positive economic impact.

There's no doubt that some businesses who weren't performing well before the virus arrived will have successfully used the government's financial assistance to "nationalise" the losses they would have made anyway.

Unfortunately that's just the way it goes, sometimes. It was better to stomach the cost of that than to risk wholesale system failure in March.

 

[Domh245]

Not at all.

In both cases trade would be so low that the businesses would have closed down. So it would be the same - zero. Only if the government hadn't ordered it there would have been less protection.

On the contrary, Sweden managed to achieve 0.1% growth in the last quarter (UK equivalent: -10.4%) and doesn't seem to have suffered nearly the same sort of collapse across all sectors that the UK did. Had we adopted a Sweden style 'light touch' approach I think it's safe to say we'd have also fared a lot better economically.

I don't disagree that we needed to step in and impose a lockdown, and that some businesses were doing poorly, but I think it's a leap too far to try and conclude that a lockdown was necessary to save the entirety of retail

 

[HSTEd]

And what do you think the state of those businesses would have been in if the restrictions had never been put in place?

Down but not heavily down yet.
The fear would not have set in yet, outside the pensioner demographic.

Government messaging would be reminding everyone that the risk to almost everyone under 40 is negligible, and outside people like diabetics is very low for people under 60.

 

[yorkie]

Yes there can surely be no doubt that Sweden managed this infinitely better than we did.

The lockdown didn't cause economic harm....

I strongly disagree.