Sunday, 26 January 2014

Rising or Falling


I listened to PMQs (Prime Minister's Questions) at Westminster during the week and caught some of the parliamentary row between the Prime Minister, David Cameron, and Labour leader, Ed Miliband. 

In the face of even more positive economic news and a further big fall in UK unemployment levels, Ed Miliband was doing his best to rain on the PM's parade by suggesting that falling living standards are the real problem - with the average family in the UK worse off by £1,600  since 2008 according to Labour.

David Cameron countered by arguing that Labour's figure (£1,600) was incorrect and did not, for example, take account of the tax cuts that his Coalition Government had delivered in recent years, by raising the level at which UK citizens start to pay tax from to £10,000 in 2014. 

Now whatever the truth of the figures being bandied back and forward it seems pretty clear that living standards for lots of people have fallen - because the national wealth or GDP of the UK took a huge hit back in 2008 when the economic recession struck.

So, if the country as a whole is worse off, then it stands to reason that a large number of citizens must have been affected as well - otherwise the arithmetic simply doesn't add up.

But what struck me as strange is that neither Ed Miliband or David Cameron pointed out the most obvious thing of all which is that Labour's figure of £1,600  does not take any account of people's housing costs - and whether the 'average' UK family is paying a mortgage or not.

Because the issue of housing costs clearly makes an great difference to the cost of living since the cost of housing (mortgage or rent) is normally the biggest single item of expenditure in the 'average' family budget.

Yet since 2008 the cost of UK mortgages have fallen dramatically while the cost of renting has continued to increase - in which case why do the main parties at Westminster pretend that a debate about the cost of living does not make any sense without considering the cost people have to pay to put a roof over their heads.

The reality is that some people's housing costs are significantly lower than they were 6 years ago - while others have seen their housing costs continue to increase.    


Cost of Living (4 December 2014)


In recent weeks the Labour Party has shifted the focus of its political attacks on the Coalition Government. 

No longer does Ed Miliband argue that the economy is stalling or flatlining - instead he says that the benefits of the economic recovery that appears to be slowly gathering pace are not being passed on to hard working families - and that the UK is experiencing a cost of living crisis. 

Now clearly this is not true for everyone and while there may be people who struggle to pay their bills and/or put enough food on the table - lots of others are actually much better off because of the artificially low interest rates the country has been experiencing since 2008.

For example, anyone with a large mortgage may be thousands of pounds a year better off - even if they are in a job where the pay has increased very little, if at all, over the past few years.

So it stands to reason that the people facing a big hit to their standard of living has to be someone without a mortgage - someone who pays rent - because their housing costs will have gone up rather than down since the UK economy went from boom to bust. 

All of which means that all this talk of a general cost of living crisis is untrue - and that a much fairer policy would be one which targeted help on citizens paying rent because they have not been fortunate enough to have been handed a big financial windfall - courtesy of nothing more than a sudden and fortuitous collapse in interest rates.

Free Money (8 January 2013)

I heard someone on the radio yesterday complaining that he would be losing out to the tune of £240 per month - as a result of the government's planned changes to child benefit payments. 

Now my heart almost bled as I listened to the chap claim (convincingly) that as a result of the unexpected drop in his income - that he might not be able to keep up his monthly mortgage payments.

Next my glass eye almost shed a tear as the poor man explained the terrible burden of having his company car taxed and treated - as an expensive benefit in kind.

'What kind of world do we live in?', I thought to myself - before quickly coming to my senses and dismissing his ridiculous claims as so much baloney and hot air.

Because as I've said before on the blog site anyone who has been paying a mortgage in recent years has very little to complain about - compared to lots of other fellow citizens at least.

For example workers in low paid jobs, people who rent instead of owning a property (via a mortgage) - or folks on a fixed income, such as pensioners.

The reason being, of course, that most people in these groups have little - if anything - to show for the artifically low interest rates which have greatly benefited UK mortgage payers in recent years - as can be seen from the previous posts below.

So my advice is simple - don't shed any tears for people losing out on child benefits because they earn more than £50,000 or £60,000 a year - because they don't need or deserve a hand-out of free money from the state.

Something For Nothing (17 July 2012)

I listened to a chap on the BBC the other day explaining how the artifically low interest rates - have been saving him £700 a month (net) on his mortgage for the past three years or so.

Now that's a fair old amount of money - in anyone's language - £8,400 in a single year or £25,200 over three years.

Or to put it another way - much more than the average salary in the UK - especially when you consider this is money in the chap's hand - net of tax and national insurance.

I've been banging on about this for a long time of course - as regular readers will know from previous posts on the blog site.

Yet so far at least - I've not heard a single politician remark on how unfair it is that so many people benefit so greatly - for doing absolutely nothing in return.


£20 Billion Windfall (5 January 2012)

I read something the other day - a claim by an organisation know as the Family and Parenting Institute (FPI) - of which I know very little.

Presumably it does what it says on the tin - seeks to speak up for families with children - because the FPI claims that average income of households with children will drop between 2011 and 2016.

By 4.2% would you believe or around £1,250 a year - depending on the exact income of the household in question.

But I say - so what - what does that have to do with the price of mince?

Because unless you factor in other things - such as how much some households have benefited from our artificially low mortgage rates - then the FPI's claim is completely meaningless.

I know some folks - some with others without children - who are saving hundreds of pounds every month necause of low interest rates - worth many thosuands of pounds a year.

So spare me all this special pleading from special interest groups - as ever they are concerned with their own narrow agenda - and have no time for the big picture.

And the big picture means big savings - not for everyone - but for those paying mortage interest when rates dropped like a stone - and the bigger the mortage the bigger some people's windfall.

Here's what I had to say on the issue in 2011 - no doubt the £20 billion figure now needs to be revised - in an upwards direction.

'All in this together' (September 15th 2011)

When people start urging us to take the view that 'we are all in this together' - it's time to stop and think.

Who's 'we'? - will do for a start.

The fact is that not everyone in the UK has been doing badly in these hard economic times - in fact people who are in a secure job and who have been paying a mortgage off - are doing very nicely thank you very much!

Compared to lots of other people anyway.

And just to demonstrate this point here's something I wrote back in March 2011 - arguing for a 'windfall tax' on the £20 billion that mortgage payers have saved in recent years - as a resul tof artificially low interest rates.

Now the people who are not part of this £20 billion windfall are - typically - the less well off and those on fixed incomes who rely on their savings - which produce little or no interest these days - to help pay the bills.

So why don't we hear any of this at the TUC conference - where delegates are good at telling everyone else what to do - but seldom come up with practical ideas for resolving problems.

A special windfall tax would recoup just some of the £20 billion that mortage payers have gained - simply through sheer luck - and it would seem to embrace the 'were all in this together approach'.

Which the present government and the trade unions both espouse - when it suits their own argument of course.

I imagine most union leaders are paying mortgages - because most live in private housing - and most will have benefited hugely out of the artifically low interest rates - we have witnessed in recent times.

Ironically the one union leader who would escape a special 'windfall tax' on mortgages - would be Bob Crow - who has been living in subsidised social housing in London for years.

But a windfall tax on mortgages would be redistribute income between the 'haves' and 'have nots'.

A windfall tax would be progressive because it would tax 'unearned income' - and would be likely to affect the majority of delegates this year's TUC.

In other words - a real life demonstration of solidarity - that we really are 'all in this together'.


Windfall Tax On Mortgages (March 4th 2011)

I read a remarkable statistic the other day - which made me stop and think.

The Financial Services Authority (FSA) has apparently calculated that the UK's artifically low interest rates in recent years - have meant an unexpected windfall of £20 billion to the nation's mortgage payers.

Yet another example of the old saying - 'It's an ill wind that blows nobody any good'.

In this case £20 billion to the good - and the bigger the mortgage - the bigger the killing people have made - without any effort or risk.

While those who can't afford or no longer need a mortgage (e.g. low paid workers and pensioners) - have lost out big time, comparatively speaking.

So I have a suggestion for the government and our policy makers.

Bring in a special windfall tax on mortgages which claws back some of this £20 billion - and use the money to reintroduce the 10p tax rate to help the low paid.

Low paid workers will spend the money - because they don't have a lot to start with - and that will help to boost the economy.

Readers will remember that the 10p tax rate was abolished by the 'man with a moral compass' - Gordon Brown - in one of his worst decisions as Prime Minister.
But here's a chance to right a great wrong - help the lower paid - boost our flagging economy - and with money that has simply fallen into people's laps by sheer luck - nothing else.