Uk Chancellor George Osbourne unveiled the longest awaited Emergency Budget in history yesterday. Libdems were trending all day on twitter as folk queued up to denounce the ‘evil’ Libdems for selling out on their promises and principles. As commentators all round cry foul – Scriptonite asks if people even realise the rules of the game they are playing.
Budget: Key Points
Generally well received by the business community with an emphasis on small business and entrepreneurship, the budget focussed on start ups and relieving the tax burden on growing small to medium enterprises (SMEs). Corporation Tax and NI contributions down. There is also NIC relief for new business and small business tax drops to 20%. Happy little entrepreneurs!
Tax bands rearranged to grant a £1000 further tax free income for the lowest earners in the UK. This works out as an average £170 per annum kept in the pocket for those people and is intended to open the gates of the benefit trap, where the tax burden of those attempting to come of benefits and into work is so great, that it acts as a deterrent to seeking work.
VAT goes up from 17.5% to 20%, but unlike worst case predictions does not spread to currently non VATable items like kids clothing and food.
Capital Gains Tax (CGT) flew up from 18% to 28%. However, with Entrepreneur’s relief this will be restricted to 10% on lifetime earnings and those outside Entrepreneurs Relief but whose taxable income is under £37,500 will remain at 18%. The point is, the tax is designed to target the highest earners and not the little guys and girls setting up their first business or trying to expand their existing businesses. Great news. Thanks coalition.
Fags, Booze and Fuel
Apart from the impact of the VAT increase, no increase in duty. Also, those of us in the west country will be relieved to see the coalition government revoke the previous governments plans to increase duty on cider. Hooray!
Public Sector Pay
25% budget cuts over 4 years with only Health and International Aid protected from the cuts equals short term pain for the public sector.
In short, anyone earning over £21,000 will have a pay freeze for two years. Anyone under that threshold gets a flat £250 increase for both years. They’re more likely to be impacted by job cuts however as the department cuts bite over the next couple of years. Sucks but no surprises.
Hooray! After all that faffing around the basic state pension will linked to earnings from April 2011 AND the pensions will rise in line with earnings, prices or 2.5%..whichever is highest. Fantastic news.
The eagerly anticipated bank levy will be introduced based on balance sheets of the big banks with small banks being exempted. More detail to follow but looking good.
Why Are We Here? The Bigger Picture
Firstly, a context setter. In immediate terms, the economy failed, the banks nearly collapsed and the taxpayer basically exercised reverse socialism…creating a welfare system for the financial services sector. This cost hundreds of billions of pounds.
In longer and more strategic terms…we have a defunct and unfair monetary system that demands winners and losers.
Most people are incredibly incurious about how the monetary system works, which is kind of weird when you consider most people spend a lot of their lives obsessed with the stuff. Either we’re musing on how to acquire more or over how to acquire things with the money we have.
Yet most of us never actually seem to ask the question – where does this stuff come from? How does this whole thing work anyway?
Welcome to Life in Platos Cave
If most people inquired they would need to start thinking and, perish the thought, even acting based on this new knowledge.
Like the prisoners chained facing the wall in Plato’s cave, we carry on regardless, listening intently to the scholars reading the shadows, rather than breaking free,turning around and taking in the whole cave…and dare I say, even moving forward and out of the cave and into the bright sun of the big wide world.
The basis of our economy is debt. Fact. All money in our fiat currency based economy is issued as a loan from a central bank to a nation state. All of it. Every penny. No kidding. In the UK, the Bank of England issues currency to the government in the form of a loan which the government guarantees to pay back in the form. Government gives a bond (a paper or electronic IOU) to the Central Bank to say: thanks, will pay you back PLUS interest agreed. Which raises the question….where does the money to pay the interest come from? And therein sits the glitch in the system….if all currency comes from the central bank, then the loan is never fully repayable once interest is created.
If I had an infinite pile of bricks and you had none. I loan you ten bricks. You can only ever give me back ten bricks without needing to ask me for more. So if I give you ten bricks and ask for 12 in return, you will need to come back to me for those extra two…at which point I will request you return not only the 12 bricks, but the ‘interest’ on the additional two bricks. And so it goes.
On top of this, the Bank of England is not part of the government. It is it’s own entity, a private concern.
The point of explaining this is to bring a wider view to the conversation about national debt. The circular conversations about percentage points of VAT, or the level of the deficit are the conversations based on the shadows on the wall and not on the wider , holistic view. The economists and the correspondents are the prisoners best able to read and forecast the actions of the shadows, not the freed prisoner able to provide us with insight, innovation and freedom from our current view.
The point is, to cry foul inside of this game is redundant. It is unfair. That’s how it is designed. Energy spent is valuable only in mitigating as far as you can, the inherent silliness of it.
I don’t like it – this game is rubbish
Then how about speculating in conversations about how money could work? How about taking on telling at least one person this week about how money actually works?
There are also political means of engaging and being part of the wider conversation about how to manage trade and monetary interests.