Freeze Shock: Rishi’s Mega Stealth Tax Will Drag 4 Million Lower Rate Taxpayers Into 40% Band

New research out from the Centre for Economics and Business Research’s Douglas McWilliams, calculates that Chancellor Rishi’s freezing of tax allowances and upper rate thresholds in the March 2021 Budget will, as a result of inflation being much higher than forecast, now mean:

“that by the fiscal year 2025/26 the number of people paying tax, which was 32.2 million in 2021/22, could rise by 5 million and perhaps even more damagingly the number of people paying higher rate tax at 40% will virtually double from 4.1 million to 8.1 million. This is a £40 billion tax rise originally planned to raise £8.2 billion.”

This £40 billion will be in addition to the £20 billion to be raised by NI hikes announced as the Health and Social Care Levy. That hike was voted through Parliament. The impact of unexpectedly high inflation on the freezing of allowances and bands was not voted for, yet it will likely double the impact of the higher NI rate. This is Rishi’s mega-stealth-tax…

The Treasury this afternoon argues that the Osborne-era above-inflation threshold rises mean that even with this freeze, taxpayers will still be ahead:

“We’ve got the most generous basic personal tax allowance in the G20 and maintaining the threshold is progressive and will ensure nobody’s take home pay will be less than it is now in cash terms.”

Take-home pay will of course be less in real terms after inflation, in addition millions of former lower rate taxpayers will now be paying tax at 40%. The threshold freeze will also go a long way to reversing the policy of the coalition government, which took 2 million low-paid taxpayers out of the tax net altogether. How the Treasury reckons bringing the lowest paid into the tax net is progressive is not clear. Guido suspects the Chancellor will eventually use the revenue raised from this stealth tax to cut the NI hike back before the general election. Using a massive stealth tax to finance cutting back taxes the Chancellor raised won’t be clever, it will be bribing us with our own money.

mdi-timer 21 February 2022 @ 15:30 21 Feb 2022 @ 15:30 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Debt Up, Spending Up, Tax Revenue Down, Unemployment to Double
  • Public sector net borrowing hit £35.9 billion in August 2020, £30.5 billion more than last month and the third highest borrowing in any month since records began.
  • Tax receipts were £37.3 billion in August 2020, £7.5 billion less than last month, with VAT, Corporation Tax and Income Tax receipts falling considerably.
  • The government spent £78.5 billion on current expenditure in August 2020, £19.5 billion more than in August 2019.
  • Borrowing in the first five months of this financial year (April to August 2020) is estimated to have been £173.7 billion, £146.9 billion more than in the same period last year and the highest borrowing in any April to August period since records began.
  • Each of the months from April to August 2020 were also record months for borrowing.
  • Government debt has hit £2.02 trillion or around 101.9% of GDP; it has risen 12% in just a year.
  • Government debt has tripled since George Osborne warned us that Gordon Brown was bankrupting the country.

To add to the misery, economist Liam Halligan is this morning predicting unemployment will more than double by the end of October…

mdi-timer 25 September 2020 @ 09:47 25 Sep 2020 @ 09:47 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
PPE Exchange Shows Availability of Masks & Gowns is Over 200% of Demand

Following on from yesterday’s good news on testing ramping up now the private sector has been brought in, here is another innovation by the private sector to match buyers and sellers of PPE supplies in a market place. was created in 7 days – as a free site to get PPE buyers and sellers in touch with each other and get supplies to the care providers. The software developers did the work for nothing and have the support of both the CBI and GBM union. PPEexchange has been designed, built and developed by and will be supported by PPEx Limited and Shoothill on a pro bono basis. Aimed at the social care sector it is open to users from all sectors as a free resource for their benefit and the good of the wider community.

With time being of the essence now and for the foreseeable future if shortages and bottlenecks can be eliminated, new alternative suppliers sourced and connections made it will in the end save lives. Once again proving that free markets can do what the centralised planners can’t, match supply and demand efficiently, driving down costs and optimising supply chains…

mdi-timer 2 May 2020 @ 11:44 2 May 2020 @ 11:44 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Bankers Told No Bonus Payouts

The Prudential Regulation Authority has written to banks and insurers to tell them not to pay out dividends or buy back shares and forget about their bonuses. British banks have complied and even European banks are following suit. The Bank of England thinks the scale of the challenge ahead means they need to keep their cash reserves. Bank shares have fallen hard on the news…

mdi-timer 1 April 2020 @ 09:38 1 Apr 2020 @ 09:38 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Tories Abandon Fiscal Targets

Today is economy day, Shadow Chancellor McDonnell will be up later promising to spend hundreds of billions of borrowed money and raised taxes. Sajid Javid has just promised to increase spending by hundreds of billions in borrowed money. No mention of that fiscal deficit the Tories promised to close in 2015.

All this borrowing will, they both claim, be financed from the sale of government gilts at the currently prevailing cheap interest rates. The market is suspicious and interest rates will inevitably rise if the market is flooded with gilts. The world’s biggest bond investment fund is Pimco, here’s what their chief investment officer for global fixed income told the FT this morning:

“The prospect of increased sales of gilts to fund more government spending makes the current high prices even less attractive. Gilt yields look too low in general. If you don’t need to own them it makes sense to be underweight”

Incidentally, the name of that chief investment officer is Andrew Balls, brother of Ed Balls. Saj knows that investors will not perpetually buy gilts at the high prices and the low yields prevailing today… 

mdi-timer 7 November 2019 @ 11:23 7 Nov 2019 @ 11:23 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Carole’s Short of Logic on “Brexit Disaster Capitalism”

In the wilder corners of Twitter, the remainiacs have a meta-conspiracy theory they call “Brexit Disaster Capitalism”, it has a number of components and is based on some far-fetched premises;

  • Brexit will be a disaster and lead to economic collapse.
  • Prominent rich Brexiteers know this, they intend to profit from it by selling short stocks high to buy back low after the disaster.
  • City tycoons and hedge fund managers financed the Brexit campaign to bring about the collapse from which they will profit massively whilst the rest of us suffer.

The fact that Jacob Rees-Mogg, for example, has an interest in a fund management firm is cited as proof. The latest incarnation and attempt to shore up the theory is based on the publicly-disclosed short interests of various fund managers who have given money to the Tories, Vote Leave or Boris Johnson’s campaigns. Carole Cadwalladr tweeted last night that they have aggregate short positions of some £4,563,350,000. Four and a half billion quid of shorts by Brexit-backing fund managers sounds like a huge amount. Except it isn’t in relative terms.

The UK stock market is capitalised at over £4 trillion, so that aggregate short position is equivalent to something like a tenth of 1% of the market. Nothing unusual. Long/short funds usually trade stock pairs, so the funds most likely won’t even be that short in net terms because a fund goes short one stock and hedges the position long another stock (hence the term “hedge* fund”). The profit (or loss) is from the difference in the stocks’ relative performances.

More obviously, these funds are overall net long the market, if these rapacious plutocrats were betting on disaster, why would they be positioned to profit massively when the broad stock market went up and lose when it went down? Publicly available data, for example, shows that the prominent Brexiteer donor Paul Marshall’s firm has £1.3 billion in short positions on the UK stock market. His firm manages some £30 billion of assets. Which suggests he is in reality geared to profit far more from rising than falling stock markets.

Incidentally, if the fund managers had been short since referendum night they would have lost their fortunes, given the FTSE is up over a 1000 points since the referendum. The whole “Brexit Disaster Capitalism” conspiracy theory does not make sense even if you accept the premise that Brexit will be a disaster. The hedge fund managers are long the market in the expectation stocks will continue to rise…

*The hedge might also be against derivatives or the relevant market index. To go short without hedge is to be nakedly short. A brave trade.
mdi-timer 12 September 2019 @ 11:35 12 Sep 2019 @ 11:35 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
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