How much will this cost me

[steve1001]

I saw a figure on a Gov site. It put a figure of £220 billion on the great UK giveaway.

I took a stab in the dark and came up with 30 million people who will likely be paying for it.

That gave me £7333 per person.

If I'm wildy out it must be something over £3000 per person at least.

I expect VAT to be the first thing to go up to, Oh I dunno, 25% 30%?
Income Tax rises?
NI rises?
Council tax rises?

Any body got any other thoughts or info on this.

Keep it financial. PLEASE, NOTHING POLITICAL. Please

Steve

 

[doctor Bob]

It will be like WW2 debt, the kids will be paying for it for 50 years.
I think every week of lockdown equals 1% income tax.
Most people I meet who are furloughed seem to think they are on a holiday, I think they may get a rude awakening if they return to work.
Also be aware that what is happening now is the tip of the iceberg ............... you ain't seen nothing yet, I suspect business is going to suffer like never before over the next 12 months.

 

[Trainee neophyte]

Dangerous ground, because we need to talk about what money is, where it comes from, and where it goes to die. It can get political before you blink.

If there was anything like a free market, you would just let the market do its thing, but you also wouldnt close the market in the first place.

We are moving into a new ara now - essentially the government will create money instead of having the economy do it - Modern Monetary Theory (MMT) claims that there will be no repercussions and everything will be wonderful. Free money for all, no need to work, but we will all be smiling, happy people living in the sunny uplands of a new dawning of civilization.

Or something.

Last year I was shot down in flames for suggesting that we had rampant inflation in our future. It looks like it is going to be happening soon, just after the appalling deflation destroys the economy and bankrupts everyone. Hold on to your hats, there are going to be headwinds. Lorry loads of new debt will be created (but not the money needed to pay the interest), and this will be inflated away, just like all the other debt is always inflated away. Debt is never paid off, because repaying debt destroys the money, which reduces the money supply, which is deflationary, and our mad money system needs constant, endless inflation to survive.

 

[DBT85]

This is just the start. The spending that will come in the next few years will wipe the floor with what's been spent so far.

Economies have a chance not seen since the aftermath of ww2 to reinvent and reinvest their entire nation. Spending on big infrastructure, low carbon, Internet etc is going to go through the roof to get countries moving, people employed and money flowing.

Doing that kind of thing in any normal year is very difficult. It's easier now as they just will have to do things.

On top of it all, a LOT more people have just worked out that they can work from home at least in part. That's great for workers as well as employers need smaller offices, less computers, etc, less cars on the road and so on.

 

[Geoff_S]

It will be like WW2 debt, the kids will be paying for it for 50 years.
I think every week of lockdown equals 1% income tax.
Most people I meet who are furloughed seem to think they are on a holiday, I think they may get a rude awakening if they return to work.
Also be aware that what is happening now is the tip of the iceberg ............... you ain't seen nothing yet, I suspect business is going to suffer like never before over the next 12 months.

I hope for another 30 years, fingers crossed, and I'm not a kid. Although my wife doesn't agree!

Anyway, as long as the cost to me is less than my life, I'm happy

 

[lurker]

Nationalise every Chinese owned U.K. company, that should be worth a few quid.
Political?
racist?
I don’t care!

How else do we get them to prevent the next one?
I believe this current catastrophe is just a taster for the real thing.
With hindsight the upsurge of ivory poaching was the very thin edge of the same wedge.

 

[garethharvey]

I saw this coming a few months back, we will be paying for years.

It will also become political with the opposition stating the current government has caused this and they will also contest the tax rises.

It will be very messy and nasty.

 

[Rorschach]

Depends how old you are. For the younger amongst us we will be paying this for our lifetime with higher taxes, mostly stealth ones I expect.

Ironic really that we are spending all this money to add a few years of life to a small % of the population, who won't suffer from the depression that has started.

I think one good way to pay for it will be a massive increase on death taxes.

 

[lurker]

Depends how old you are. For the younger amongst us we will be paying this for our lifetime with higher taxes, mostly stealth ones I expect.

Ironic really that we are spending all this money to add a few years of life to a small % of the population, who won't suffer from the depression that has started.

I think one good way to pay for it will be a massive increase on death taxes.

Don’t forget that us wrinklies were still paying for the Second World War up until only a few years ago.

 

[Rorschach]

Depends how old you are. For the younger amongst us we will be paying this for our lifetime with higher taxes, mostly stealth ones I expect.

Ironic really that we are spending all this money to add a few years of life to a small % of the population, who won't suffer from the depression that has started.

I think one good way to pay for it will be a massive increase on death taxes.

Don’t forget that us wrinklies were still paying for the Second World War up until only a few years ago.

Not forgotten at all (by me anyway). Different situation though.

 

[thetyreman]

I care most about small and medium size businesses and self employed individuals, they drive the economy!

I can't help thinking it will cause massive riots and protests if it goes on too long...

 

[Terry - Somerset]

Keeping it financial for the moment - the UK gross domestic product was £2.2tn (trillion) in 2019. This is about £180bn per month.

Assuming the virus knocks out half the economy for three months this amounts to around £270bn. It is only half the economy as some bits - NHS, police, food, pharmaceuticals etc - are still working. And three months loss may be the average over a total duration of (say) nine months as lockdown is gradually relaxed.

Some parts of the economy will clearly fare worse than others - food may be bouyant, but pubs, restaurants and tourism may suffer most.

Some of the £270bn will be a one off loss this year, but much will simply need to be borrowed to fund current government "largesse". There will also be a longer term impact as I suspect unemployment will rise, certainly for a while, and personal behaviours may change radically as a result of the crisis - eg:

- work from home becomes embedded
- online shopping increases - ten years progress in 10 weeks?
- reduced commuting and travel
- changed personal values - home, family vs work, money
- video becomes commonplace - GP, accountant, solicitor, family, etc

Structural change like this will inevitably create winners, losers, opportunities etc and represents a big unknown at the moment.

So back to the original question - how will all this be paid for. There are around 30m people employed in the UK. So to repay borrowings of £270bn is around £9000 per head.

In a very simplistic way national economies have precisely the same characteristics as an individual. Very much more complex, and the capacity to affect 60m people in the UK, but not dissimilar.

So what does a normal person on a normal salary of (say) £24k pa after tax do if suddenly faced with a bill for £9000:

- my current income is all spoken for so I need to borrow some money
- I already have a mortgage and some loans/national debt
- can I sell any assets (classic car, coin collection etc)/ privatisation (of what)
- over what term and at what interest rate
- how do I cut current expenditure to enable repayments/austerity measures
- can I increase my income - change job/become internationally competitive

There is no easy or right answer for either an individual or a whole economy. Too fast and austerity may create rather than solve problems. To slow and our children will still be paying in 20 years time.

The solution to it all is to bring in that which we avoided at the outset - politics. The strategy adopted will inevitably impact differently in different groups - eg: elderly with pension concerns vs young with family commitments. This will be a political issue, are we all in it together, what takes priority - economy or public services or higher taxes.

 

[garethharvey]

Ironic really that we are spending all this money to add a few years of life to a small % of the population, who won't suffer from the depression that has started.

Not quite, this has been done to allow the NHS to manage patients. If this had not been done, the hospitals would have been over-run and a significant amount of people would have lost their life.

 

[Rorschach]

Ironic really that we are spending all this money to add a few years of life to a small % of the population, who won't suffer from the depression that has started.

Not quite, this has been done to allow the NHS to manage patients. If this had not been done, the hospitals would have been over-run and a significant amount of people would have lost their life.

Yes I understand that, but it is clear the lockdown was too severe and too soon. Hospitals are empty, extra beds not being used. Countries with much less severe responses are not being overrun either. Look at Sweden, no lockdown just sensible precautions and their curve is very similar to ours. Their economy will not suffer like ours. Already today I heard several big companies have already thrown in the towel, how many more will go?

 

[D_W]

I care most about small and medium size businesses and self employed individuals, they drive the economy!

people have this sentiment in the US, too. It's a strange fallacy that money from large corporations doesn't do anything. 90% of the equity here that pension funds are invested in are mid and large cap companies. If they do poorly, so do their employees, so does their stock, and so does everyones' pension.

If the pensions do poorly, our taxes go up, benefits get cut or both. Folks who have invested for retirement see a decline in the value of their accounts.

financial breaks are given to large businesses to keep them from fleeing (and taking their tax base with them). Financial breaks are given to the small folks (I work for a small business, and I'm a small guy) to buy votes. You can't do without both, and neither can do without the other. We've seen how harsh life is without industrialization and corporate/large wealth base (pre-industrialized economy, venezuela, etc). There is no way to store wealth and no stability. When most of my retirement savings are in large corporations (as are the local governments' trusts, etc), I have no interest in this unnecessary division into "them vs. us". It's all us.

 

[DBT85]

Ironic really that we are spending all this money to add a few years of life to a small % of the population, who won't suffer from the depression that has started.

Not quite, this has been done to allow the NHS to manage patients. If this had not been done, the hospitals would have been over-run and a significant amount of people would have lost their life.

Yes I understand that, but it is clear the lockdown was too severe and too soon. Hospitals are empty, extra beds not being used. Countries with much less severe responses are not being overrun either. Look at Sweden, no lockdown just sensible precautions and their curve is very similar to ours. Their economy will not suffer like ours. Already today I heard several big companies have already thrown in the towel, how many more will go?

It wasn't possible to predict how many more beds were going to be needed. I would argue given the evidence coming from Italy that we were too slow to react at all. The ultimate lock down may be more severe than other places, but then some of them also took less harsh measures earlier and earned the benefit of it.

We were still allowing mass gatherings at football and Cheltenham to go ahead well into the period where things were clear and obviously shouldn't be happening.

 

[thetyreman]

I care most about small and medium size businesses and self employed individuals, they drive the economy!

I have no interest in this unnecessary division into "them vs. us". It's all us.

nor do I, and neither did I say such things anywhere in my post, stop trying to turn my post into an argument please.

 

[lurker]

When I were a lad.......... the only thing that really mattered was the balance of payments.

Mr Micawber expressed all we needed to know about the economy.

 

[Terry - Somerset]

We do have to realise that there is a trade off between the economy, the spread of the virus, and death toll.

Had the virus had been allowed to spread uncontrolled in the UK the total death toll would be close to the overall mortality rate for the virus.

Assuming a 1% mortality rate, total deaths would be in the order of 600k. They may have been skewed towards the elderly and those with underlying conditions - but we all have, and most of us value, older friends, parents, brothers, sisters, aunts and uncles etc.

With a transmission rate of 2.5 we would about today be at peak deaths with between 30000 to 40000 deaths a day.

NHS and burial/cremation services would be utterly overwhelmed. Bodies unless removed rapidly would start to decay. The only solution would likely be mass burials.

For some this may be a price worth paying to get through the crisis quickly, although I suspect for most it would be completely repugnant. In any event it would cetainly be a guaranteed vote loser which is why no politician in power would contemplate such a policy.

The only question is how quickly lockdown can be relaxed - a function of risk, testing, monitoring, contact tracing etc.

 

[Rorschach]

We do have to realise that there is a trade off between the economy, the spread of the virus, and death toll.

Had the virus had been allowed to spread uncontrolled in the UK the total death toll would be close to the overall mortality rate for the virus.

Assuming a 1% mortality rate, total deaths would be in the order of 600k. They may have been skewed towards the elderly and those with underlying conditions - but we all have, and most of us value, older friends, parents, brothers, sisters, aunts and uncles etc.

With a transmission rate of 2.5 we would about today be at peak deaths with between 30000 to 40000 deaths a day.

NHS and burial/cremation services would be utterly overwhelmed. Bodies unless removed rapidly would start to decay. The only solution would likely be mass burials.

For some this may be a price worth paying to get through the crisis quickly, although I suspect for most it would be completely repugnant. In any event it would cetainly be a guaranteed vote loser which is why no politician in power would contemplate such a policy.

The only question is how quickly lockdown can be relaxed - a function of risk, testing, monitoring, contact tracing etc.

True, but at the moment the mortality rate looks to be under 0.3% so 200k or so deaths, with social distancing and self isolation of the old and vulnerable that could have been spread over many months and it would barely have registered as worse than a bad flu year.