Originally Posted by Koolpc
I live in an area / workforce who are definitely 'low paid'. Minimum wages with increasingly higher taxes etc. The 'fat cats' do not suffer like the low paid. We can't keep up with inflation, higher taxes, higher costs of living. The majority of low paid workers are not 'living beyond their means' as you put it Saracen, far from it. The ones i know are only just keeping their heads above the water!!
The country as a whole has been living beyond it's means. That doesn't mean everyone in it has. I did not intend to suggest that everyone has, and certainly the very low paid often aren't.
But a lot of people are, in all sorts of ways. That's partly in housing expectations. Many, MANY people have taken on mortgages on properties that they couldn't really afford, relying on property prices to
continue to increase in order to end up with a property actually worth the size of the mortgage. And there are people that have consolidated existing debt (on, for example, car loans or credit card debt) into their mortgage, and ended up with a mortgage at 120% of the value of the house. Then, to top it off, they now find their fixed-rate mortgage ending, and because they not only don't have equity in the house but are often in negative equity, they are having trouble affording the variable rate from their existing lender, but can't get accepted by any other lender. Why? Because they took on a mortgage they couldn't afford, and assumed that things would continue to get better, that prices would continue to rise, and that didn't happen.
Do I have sympathy for people caught like this? Yes, of course. But the fact remains that they took on that mortgage on the bet that things wouldn't deteriorate. Some people did it to get on the housing ladder ... and I sympathise with that, too. But if the only way to do it is to roll existing debts into the mortgage and that means taking a 120% or 125% mortgage, then they couldn't really afford to do it. Yes, they were caught in a trap were the longer they waited, the more prices rose and the harder it looked like it was going to be to do it. But nonetheless, it was a risk, and it has blown up on a lot of people spectacularly and now they're really in the poop.
Others have funded new cars, new kitchens, foreign holidays, fancy hi-tech toys and so on on their credit cards. And, as often as not, they did it because they felt rich due to apparently ever-increasing house values. And, after all, you can always remortgage and fold that debt in to the mortgage, right? Wrong! And because house prices keep going up, it's kinda like money for nothing. Which is fine .... until fixed rate deals come to an end and mortgage rates start going up.
And make no mistake, koolpc, if inflation-proofing wage rises start becoming the norm, if the unions get greedy and decide to protect a standard of living that the country couldn't really afford in the past by going for ever-larger pay rises, then to protect against a damaging inflationary spiral, there's only really one thing the Band of England can do and that to start hiking interest rates. Mervyn King said as much yesterday.
Yes, there are may low-paid people just about keeping their heads above water. I don't dispute that. But, as a country, we've had years of binge-spending, financed by borrowing. And now, as a country, we're going to to pay the price. And, as you quite rightly point out, the lowest-paid are going to suffer most. I don't like it any more than you do, kool, but it's the reality of the situation. That inflation-proofing rise might be right for the individual trying to keep his head above water, but it's also wrong for him, and the country, long-term. An inflationary spiral won't help anyone, and as I said before, the lowest paid are likely to be the ones hurt hardest by inflation. Therefore, in my view, the choice currently before the low-paid is pain now, or more pain for longer if wage rises get out of control. It;s not a very palatable choice, but it is the one being faced.
Originally Posted by Koolpc
Higher taxes means more heartache, especially for those who are getting strangled by ever increasing bills.
It is not just about making sure wages go up accordingly. It is not just about everyone tightening their belts, no, it is about getting the big companies with their fat profits to cut their prices. Being made to do so. It is about the government being forced to cut taxes. It is probably about the people of the UK kicking Gordon Brown and his government out of office.
I can't see Labour getting in for another term. Not with the whole country up in arms about the ever increasing taxes etc.
As things stand, I entirely agree with the last line. Much will depend, however, on what happens in the next year to 18 months. It's
possible Labour can turn it around ... or that the Tories can screw it up. But, in my view, not all that likely.
As for taxes, well, that's entirely another issue from pay demands.
I have two issues with taxes. The first is the level they've been running at. The second is what's being done with them.
If we want to get out of our current economic trouble, then, as per my earlier analogy, we either have to tighten our belts or work harder. In relation to the economy, "work harder" means increase productivity and increase economic growth. And that, rather than the individual working harder, was what I meant. And high taxes don't encourage that.
But, government has a limited number of places to get money from to pay for things it has to pay for .... like health, education and the police. So, any modern state needs taxes. And if you want to cut taxes, you either have to increase borrowing (which merely stores up the problem for the future, and Brown has been doing that like crazy too), or you have to cut services, or you have to get better value for money.
Part of the gripe I have with New Labour's tax levels is that I can't see value for money. Yes, some things have improved. But not, as far as I can see, by anything like the level they should have given the money spent. And, of course, Brown has been prolific at private finance initiatives, under which private enterprise builds things like hospitals, and gets their payback in the form of long-term contracts to run, or maintain, them. The trouble is, far too many of those contracts are at punishing and uncompetitive rates. For Brown, this has the wonderful advantage of getting hospitals (etc) built without directly borrowing the money, because the government doesn't stump it up, up-font. What they do do is commit the taxpayer to paying for it for several decades. What he's achieved is to shift the cost of that financing "off balance sheet". It doesn't look like government debt, but it is because we, the taxpayer, will be paying for those contract for years ... decades. And that money has to come from .... taxes.
So yes, you could ease the burden on people, especially the low-paid, by cutting taxes. But if you cut taxes, what services do you cut?
Again, as I've pointed out, the
country has been spending beyond it's means. Governments have committed to things that we, the taxpayers, have to pay for, both now and for many years to come.
There's a rather smug phrase the Tories have been using recently that I don't particularly like, but I have to say it's pretty apt. Brown, in his 10 years as Chancellor during an almost unprecedented (at least in modern times) period of stability and low inflation, should have been fixing the roof while it was sunny, and putting away a few quid for a rainy day. Well, he didn't. Not only did he not put a few quid away, he borrowed like crazy. It made him look good at the time, and many people belived his self-promotion. But Gordon, you muppet .... first rule of dealing with holes -
stop digging.
Now, we have a rainy day, no rainy day fund, and debt collectors at the national door. Well, gee thanks Mr Smug Iron Chancellor. What a fraud.
Brown is fond of saying we're better placed than most countries to withstand economic hard times. Utter hogwash. And, I rather think, the next year or two will prove the point. Which rather suggests Labour are going to have a torrid time of it at the next election. I hope. Of course, it remains to be seen if Cameron's Tories can do any better.