One thing about indexation of allowances though. You shouldn’t uprate them by RPI (and certainly not CPI). They should go up with wage inflation. Yes, I know it ain’t going to be true this year but over the decades real wages (ie, after that RPI adjustment) go up by 1-2% a year, year on year. So if you don’t upgrade by wage inflation (and this holds true for the upper band as well) then you’re going to get ever more people sucked into the income tax net (and, indeed, the upper band).

Brown has never raised the allowances by more than RPI and in at least one year he froze it altogether. Of course, it’s not just him that has done this over the decades, but this is thre reason why 50 years ago you hardly paid income tax on average wages and now someone part time on minimum wage does.

£4 ph on a 40 hr week would be £8320 pa – at which point our government turns up and demands 20% of the last (approx) 2.5K – getting on for £500 !

In a Liquidity Trap although Saving (S) is abnormally high investment (I) is next to 0.

Hence, the Keynesian paradigm I = S is not verified.

The purpose of Quantitative Easing being to lower the yield on long-term savings and increase liquidity it doesn’t create $1 of investment.

In a Liquidity Trap the last thing the Market needs is liquidity.

Quantitative Easing does diminish the yield on long-term US Treasury debt but lowers marginally, if at all, the asked yield on long-term savings.

Those purchases maintain the demand for long-term asset in an unstable equilibrium.

When this desequilibrium resolves the Market turns chaotic.

This and other issues are explored in my tract:

A Specific Application of Employment, Interest and Money
Plea for a New World Economic Order

Abstract:

This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.

It shows that no fiscal or monetary policy, including the barbaric Quantitative Easing will get us out of depression.

A Credit Free, Free Market Economy will correct all of those dysfunctions.

The alternative would be, on the long run, to wait for the physical destruction (through war or rust) of most of our productive assets. It will be at a cost none of us can afford to pay.

In This Age of Turbulence People Want an Exit Strategy Out of Credit,
An Adventure in a New World Economic Order.

A Specific Application of Employment, Interest and Money
http://edsk.org/interest.html

Press release of my open letter to Chairman Ben S. Bernanke:

Sorry, Chairman Ben S. Bernanke, But Quantitative Easing Won’t Work.
http://www.prlog.org/10162465.html

Yours Sincerely,

Shalom P. Hamou AKA ‘MC Shalom’
Chief Economist – Master Conductor
1776 – Annuit Cœptis.

Much better would be to raise the threshold, keep tax credits (with some modifications) and make up the money by increasing taxes on higher earners, and cutting spending on things like ID cards.

If it did I would completely welcome it. Cameron wouldn’t reverse it, so it looks permanent like.

I said realistic inflationary figure (for this type of thing at least), of which RPI is not in the slightest.

When someone comes up with a “only the shit we really need to buy” price index, then I’ll listen

Amen.

(Well, they employed a lot of people. And LBH, Gordon likes nothing more than an overcomplicated, bureaucratic and expensive way to do the fucking obvious.)

First, I’ll believe it when I see it; second, I’m assuming it means a universal personal allowance of £10K, so even those people who aren’t ‘hard-working families’ on ‘middle incomes’ will get a tax cut as well. Perhaps if Brown had thought of this (and the proposed 45% top rate) ten years ago, New Labour would be viewed rather differently.

And I would support a higher top rate to pay for it.

As long as the lunatic tax credit system is also properly reformed and cost savings found there.

It has always been a disgrace that those on min wage have to pay tax and then claim it back.