Saturday, 29 March 2014

Is youth really wasted on the young?

My Budget comment, as published in the Western Mail (28/03/14)

Budget giveaways and the young

SIR – Last week’s Budget laid bare the failure of young people to engage with Westminster politics.

While the Government is doing a great deal for young people with the youth contract, boom in apprenticeships, help to buy, work programme, and more, there is plenty more that could be done.

But with a disengaged electoral constituency (less than 44% of under-35s voted in 2010, compared to 75% of over-55s) why would our political masters expend their political capital?

The whole Budget debate showed how failure of young people to engage can shift political priorities. Take just one example, the lively pre-budget debate about tax rates and 40p failed to even mention the marginal tax rate of 51p for young graduates (40% Inc tax; 2% NI; plus 9% student loan) or the criminal rates of 72p over £100k (accounting for allowance withdrawal).

All this means that while older people have done better in recent years than their younger relatives with the IFS last year concluding that incomes of those in their 60s and 70s rose after the recession, while the median income among people in their 20s has dropped 11%, it is the taxes of the young that will pay for budget giveaways to pensioners.

The granny-giveaway Budget was right for the time, but is a damning reflection on the failures of young people to engage with British politics and shape the political landscape.

The saying may be “youth is wasted on the young” but if my generation fail to make a stand we can be sure that “budget giveaways are wasted on the young” will be just as true.

Owen Meredith


Tuesday, 21 January 2014

Funding of up to £2,000 available for young people for community projects


UK Youth and Starbucks have announced a new round of funding as part of Starbucks Youth Action which is available to young people across the country to deliver a project making a positive difference to people in their community.

Starbucks Youth Action are inviting applications from young people aged between 16-24 and living anywhere in England, Scotland or Wales to apply NOW for funding. Applications are open until 9am on 17 March 2014.  

If you're interested in applying please visit the Starbucks Youth Action website for further guidance.

Wednesday, 18 December 2013

Will interest rates rise in 2014? Unemployment is now down to 7%

Today we saw unemployment figures that were far better than analysts expected and brings the unemployment rate in the UK to its lowest level since the start of 2009, a near 5 year low.

With the rate now at 7.4% minds will be turning to the words of Bank of England Governor, Mark Carney, in his Forward Guidance issued earlier in August - 'the MPC will not consider raising interest rates until the unemployment rate falls below 7%'.

At the time, the Governor predicted it would take about three years and the creation of 750,000 jobs to hit that target. I argued on this blog that 3 years was far too long and that history taught us it was possible - with a growing economy - to achieve 7% in just 9 months.

Today, just 3 months after Carney gave his Forward Guidance, the employment rate has risen by 0.5% (250,000 more people in work) and unemployment rate is already down from 7.8% to 7.4% (today's employment data is up to October).

But hidden in some experimental statistics from the ONS there is a sign that even that 9 month estimate could be too cautious. According to seasonally adjusted Single Month Labour Force Survey Estimates for October 2013 unemployment has already hit that low of 7%.



Instead of waiting 3 years for unemployment to dip below 7%, this data suggests it could have taken just 3 months.

While no one wants to see interest rates climb and choke off the recovery, there may be a glimmer of hope for savers in 2014 that years of near zero rates that have supported the economy back to health could be coming to an end.

Thursday, 5 December 2013

Today's #AutumnStatement is a chance to cut taxes (and make them greener)

My article on Trending Central yesterday ahead of the #AutumnStatement


This week’s announcement by the Government on energy bills will cut the average bill by £50. It’s a progressive move, despite the fact it shifts the burden from consumers to general taxation. It will benefit poorest households most, many of who continue to benefit from Warm House Discount worth £120 a year to 2 million households. Everyone will benefit from these plans – unlike Labour’s energy price con, which is lose-lose for everyone.

However, the plan also risks setting a worrying direction of travel.

In his own words in 2007, George Osborne set a very clear objective for a future Conservative Government. He said “The Conservative Party will rebalance the tax system away from jobs and families and towards pollution and carbon emissions – pay as you burn not pay as you earn.

Further to this the then Leader of the Opposition David Cameron wrote in for the Green Alliance (2007) “The Conservative’s aim is not to increase the tax burden on hard working families but to rebalance taxation so that the polluter pays and the non-polluter pays less. It’s time to move taxes from income and investment to pollution – pay as you burn, not pay as you earn.

But as the financial crisis and Labour’s recession hit, political attention turned to saving the global economy rather than the environment. Quite rightly the Government’s focus in office has been on tackling the deficit (now reduced by one third). And, while we have seen the Office of Tax Simplification established and there has been some progress on reducing the UK’s tax code, there has been little effort to shift the burden of taxation.

Let me be clear, green taxes should be about changing behaviour and not raising revenue. In the Conservatives Manifesto for 2010 they pledged to "increase the proportion of tax revenue accounted for by environmental taxes". The same pledge is repeated in the Coalition agreement.

As Geoffrey Lean reminds us in The Telegraph, the Chancellor said "Instead of a tax system that penalises hard work and enterprise ...I want to move towards more effective and fair taxes on pollution." David Cameron put it even more simply: "We want to increase tax on bad things, and try to relieve tax on good things."

In a separate article in 2009, Geoffrey Lean made the argument for better green taxes, highlighting an argument which is key to today’s announcement on energy bills: “[Government] has managed to attract all this obloquy while actually reducing the already small proportion of its revenue that comes from green taxation by more than a fifth since Labour took office. Indeed it now makes up less of the tax take than at any time since the 1980s, long before anyone had ever heard of the concept.”

This strategy – of shifting and cutting the tax burden - much trumped in opposition, was right.

But so far the direction of travel has stalled. In March this year the Government published its own analysis of tax plans, showing environmental taxes will rise for 0.5% of revenue to 0.8% of revenue by 2017/18; hardly a seismic shift. But as the IFS point out, the Treasury figure are a diversion at the very least, marking the true picture: “International bodies such as the OECD and Eurostat, define environmental taxes not according to their intent [as HMT does], but on whether the tax encourages pro-environmental outcomes. On this basis, the ONS classifies taxes such as fuel duty and air passenger duty as environmental, which the Treasury does not.”

Under these plans to IFS forecast green taxes will in fact fall from 7.3% to 7.0% by 2017/18 and the ONS suggest they will fall from 7.8% to 7.1%. This comes off the back of Gordon Brown’s time in office which saw environmental tax revenues fall by 22% as a proportion of total revenue – to 7.3 per cent, the lowest since 1987.

Under this Government we have had welcome freezes and cuts in taxes that hit the cost of living – fuel duty, green energy levies – but ahead of this week’s Autumn Statement George Osborne should remind himself of his words in opposition and put into action a tax plan that promotes enterprise, rewards work, and tackles the environmental challenge ahead of us - “Instead of a tax system that penalises hard work and enterprise ...I want to move towards more effective and fair taxes on pollution.”

It’s time to make pay as you burn, not pay as you earn a slogan matched by action.

Wednesday, 6 November 2013

The problems with ‘social tariffs’




Ed Miliband has today called on water companies to introduce special lower tariffs for low  income households. This hot the heels of his pledge to freeze energy bills and bid to boost wages by offering short term tax cuts.

It might all seem like an attractive package to tackle cost of living and low pay, BUT it totally fails the aspiration test.

Labour solution yet again is to throw money at structural poverty in the hope it will go away. But the problem with throwing money at a problem like this is that rather than go away it entrenches it.

Take someone on the living wage of £7.65 an hour, working full time (37.5 hours), with an annual income of around £14,900 a year.

At that level you could easily be eligible for housing benefit, council tax benefit, working tax credit, child benefit, child tax credit, and a raft of other benefits.

The problem comes when you start to earn more money.

This is an inevitable problem that occurs when the State is handing out cash (and that is not universal). As personal income rises and that support is withdrawn people’s marginal ‘tax’ rates shoots up. Where someone earning £14,900 a year and not claiming any benefits pays around 32 pence in every pound back to the exchequer (20% Income tax, plus 12% NI), someone on universal credit will pay 65 pence.

The Government’s white paper ‘Welfare that Works’ which led to the introduction of Universal Credit acknowledged:

The combined effect of benefit withdrawal rates and additional tax as earnings increase is called the Marginal Deduction Rate and has the same practical effect as a tax rate. Currently, when combined with tax and National Insurance payments, the withdrawal of Tax Credits, Housing Benefit and Council Tax Benefit can lead to Marginal Deduction Rates which are nearly 96 per cent, much higher than the highest rate of Income Tax.[1]

A poverty trap designed and created by Government.

If Miliband is given the chance to enforce his socialist plans, and we force businesses like water companies and other to supply goods to consumers at a price based not on the cost to supply, but on the ability of the individual to pay, not only will we undermine the basis of capitalism, but we create a signifcant further barrier to work.

The incentive for an individual earning £15,000p.a. to earn an additional £1,000 is low to minimum at a Marginal Withdrawal Rate of 96%. Universal Credit reconsiders this and lowers it to 65% - but that is still higher than the top rate of income tax that we know damages investment and entrepreneurial activity at the top end of the economy.

If you can take home £350 of the extra £1000 you earn, most will decide it is worth doing, as this £250 increases your spending power and ability to enhance your lifestyle.

But if in doing so, you find the price of goods you buy has also risen, and your money doesn’t go as far, what’s the point? Earn more and erode your spending power or stay on a lower wage and maintain your lifestyle.

The more you try to tackle poverty with handouts the more entrenched it becomes and the barrier to work grow. Miliband has fundamentally misunderstood the basics of economics and personal motivation and should go back to the drawing board.

Thursday, 8 August 2013

Forward guidance, but how far forward?

New Bank of England Governor Mark Carney has started making an impression in the first months in the jobs. Yesterday he, and the MPC, said that interest rates would stay at 0.5% - an historic low - at least until unemployment in the UK economy has fallen below 7%.

So called 'forward guidance' issued by Mr Carney is designed to reassure businesses and individuals and reduce long-term borrowing costs in-line with the record low short term base rate. 
The Bank also made a forecast about how long that process might take - they estimate 750,000 jobs are needed to bring unemployment down to 7% and that could take three years.
But why so long? In the latest 18 month period that we have data for (September 2011 - March 2013) the UK economy added 734,000 workforce jobs (Source: ONS). During that time we had GDP growth of just 0.2%. 
Since the end of that quarter we have already seen GDP growth of 3 times that rate in one quarter alone, with forecast of 1% growth in Q3. Surely 7% unemployment could be a lot closer than they think?
The last time the UK had 7.8% unemployment and falling was Oct-Dec 1996, when it took just 9 month (until Jul-Sep 1997) to drop below 7%, hitting 6.8%. With growth averaging 1% a quarter over that time.
With encouraging data from across the economy adding to business and consumer confidence, maybe we wont be facing 7 years of near zero base rates before savers begin to get a reprieve.



Unemployment has not been at 7% since early 2009.

Wednesday, 24 July 2013

Someone's jealous of all the attention #Unite are getting

Looks like Unite and Len McCluskey might not be the only Trade Union out to cause trouble for Ed Miliband. 

Unison posted this advert today, looking to beef up their press team. A sign of something brewing...