Hard Up Nation
Posted: February 25, 2021 Filed under: Finance, Social inequality | Tags: Financial Lives, HMRC, Incomes Leave a commentby PDR
I was lucky. Lots of job opportunities when I graduated, and a defined-benefit (final salary) pension. So much tougher for the debt-burdened 20- and 30-somethings of today, who may not be able to accumulate enough to fund a retirement. Why is the Westminster government not showing more concern? Who will pay taxes in what is looking like a future of insecure, low-wage work? Does it matter?
For it not to matter, change in the global financial network would have to be revolutionary, not a popular word in Westminster!
Yet in the interests of social cohesion, it is surely vital to halt the impoverishment of a good third of the UK population. I am not arguing for much more cash to buy stuff, but for more dignity – decent energy-efficient housing, enough nutritious food, time for leisure and interesting hobbies, dependable public services for all.
Financial Lives 2020
The story told in the ‘Financial Lives 2020’ survey from the Financial Conduct Authority, published on February 11th 2021, is alarmingly different. In October 2020 almost four in 10 – 38% — of all adults in the UK were not feeling financially stable. They experienced one or other, or all of these:
- Expectation of struggle to make ends meet.
- Higher levels of debt.
- Worry about being unable to pay domestic bills, mortgage, rent, or interest on loans, in the next six months.
There are huge differences by age: over six in 10, 61%, of young adults aged 18 to 24 felt financially unstable, and 55% of the 25 to 34s, down to 11% of over-75s, who would nearly all have at least a basic pension.
Property prices are far too important in the financial mix, to the detriment of young people. Mortgage-payers depend on the value of their home going up and up, for a fall could see them in negative equity. No less than 20%, one fifth, of all mortgagees have an outstanding home loan exceeding four times their annual income, according to the survey. Even among the 65-74-year-olds with mortgages, 19% of them owed over four times their yearly income.
But for high numbers of young adults, of course, low incomes and high property prices mean that owning their own home is an impossible dream.
Scant reward for saving
Saving is unrewarding, given the near-zero interest rates offered in 2021, and indeed most people have little to squirrel away. The survey reports that between 41% and 49% of adults have less than £5,000 in ‘investible assets’, which are cash, savings accounts, shares, bonds and similar products.
More than half, 53%, of over-18s in the UK had at least one ‘characteristic of vulnerability’ in October 2020, during the havoc of Coronavirus. This covers poor health, or experience of a negative life event (such as a family death, or losing their job), and 20% were not highly capable of managing their financial affairs in the new digital world.
The survey report is reinforced by figures from Her Majesty’s Revenue and Customs (HMRC). This is older data, as the most recent figures for incomes are for 2017-18, when the median pre-tax income for all 31.2 million UK taxpayers was £24,400. Now 31.2 million is a lot of taxpayers, but the 2018 population was 66.3 million and if we exclude under-18s, few of whom pay income tax, the figure was 52.4 million people, so about 21.2 million adults had incomes too low to be liable to tax.
Missing middle
A median income of £24,400 means that half of taxpayers had a lower income than this, and half had more. It is not a figure that would cover food, housing, utilities, clothing, a holiday, all the expenses of modern life, and leave anything much over for saving. Indeed, median pre-tax incomes for under-30s were under £23,000 overall, slightly more (£23,700) for men aged 25-29 but less (£21,800) for women. There is no longer much of a ‘middle’. In 2017-18, 95% of taxpayers had a pre-tax income of under £76,800. The median income of the next 4% was £175,000. Those above this, in the highest-earning 1% (of taxpayers, not people), had stratospheric incomes compared with the vast majority of the population, but their median is excluded from the table (no. 3.1 in HMRC’s series on personal incomes).
In such an unequal society, and one becoming more unequal by the year even before the disaster of Coronavirus, how will it be possible to achieve the change to sustainable communities where everyone can feel secure, valuable and included?
Is it possible at all?
Welsh Government Plans for Future Agricultural Support are a Huge Challenge for Rural Communities
Posted: December 16, 2020 Filed under: Agriculture, Finance | Tags: Agriculture (Wales) White Paper, Welsh Government Leave a commentThe Welsh Government’s new White Paper on agriculture post-Brexit is strong on ideals for farming to deliver ‘public goods’ in the form of benefits such as cleaner air, vegetation to delay water run-off and store carbon, higher water quality, more biodiversity, and improved soil quality.
According to the Agriculture (Wales) White Paper published on December 16th, there will be no continuation of the Basic Payment Scheme (BPS), which subsidises farms according to their size in qualifying hectares (one hectare is 2.47 acres). Welsh farmers are heavily dependent on the BPS. The Welsh Government’s own data (Farm Incomes in Wales, April 2018 to March 2019, published in December 2019) shows that annually around 20% of farms are making an overall loss even with subsidies, and over half would make a loss without subsidy and diversification – over 60% in 2018-19, the most recent year for which data is available.
As yet there is no clear information on the amounts to be invested in the proposed new Sustainable Farming Scheme, to replace the existing system – which can remain broadly in place (but with less cash) until the end of 2024, five years after Brexit – and the Welsh Government admits there is still much work to do on the structure, mechanics and future evaluation of the new support system. The plan is to introduce the Agriculture Bill, detailing the Sustainable Farming Scheme, in summer 2022.
Welsh agriculture and rural communities have benefited from about £337 million a year in support from the European Union. That is equivalent to £6,370 for each of the 52,900 farmers and farm workers in Wales. The subsidies have been life support for Welsh farming. There is as yet no clue whether the Welsh Government will replicate this level of funding. If the budget is lower, it is arguable that the 20% of farmers who make a loss despite receiving subsidies, and many of the additional 40% who need subsidies and non-farming income streams to break even, would risk severe financial distress trying to reorient their businesses quickly to the desired sustainability model.
The Welsh Government’s aims include increasing tree cover, raising production of arable crops, fruit and vegetables, improving soils, habitats, and biological diversity, and strengthening local supply chains so that more Welsh produce finds its way to Welsh consumers. Other priorities include protecting Welsh language and culture. More than four in 10, 43%, of people living and working on farms in Wales are Welsh-speaking, a higher proportion than in any other occupation, and therefore severe financial distress in rural communities would imperil the language.
The aim of public money for the public benefit of a cleaner, healthier environment is logical and necessary, but food needs to be central to the mission too. The White Paper suggests that taking produce off the market, in the case of exceptional volatility or glut, would be the method of supporting food production. This ‘intervention’ is a standard EU practice and is unlikely to compensate for the loss of basic payments.
The White Paper also proposes a reduction in the complexity of regulation, with the creation of one set of minimum standards, including for animal health and welfare; substantial changes to the enforcement of regulations to make penalties more proportionate to the misdemeanour, and a switch from criminal to civil proceedings for offenders outside the BPS, who have been treated differently from those in receipt of EU funds. Monitoring of compliance would be ongoing, making maximum use of data from satellites, and barriers to data sharing would need to be removed (perhaps raising concerns about privacy). There would be a new dispute resolution scheme for farmers with tenancies under the Agricultural Holding Act 1986, whose landlords might not agree to actions required to qualify for support under the Sustainable Farming Scheme.
Advice would be a big part of the new world for farmers. There would be an initial sustainability assessment for every applicant for support, and then advice on how to provide the improvements needed for greater resilience to climate change and other environmental emergencies such as soil erosion and degradation. That’s a large requirement for advice, but not yet guidance on who is going to provide it, and at what cost to the public purse.
The environmental aims of the White Paper are very welcome, but such a rapid reshaping of financial support for agriculture is a huge challenge facing both Wales’ farmers and the bureaucracies that will have to help them leap over the new hurdles.
Here is a link to the full White Paper. The consultation on it closes at 23.59 on March 25th 2021.
PDR
EU Parliament Drags Feet on Agriculture Policy Reform
Posted: November 11, 2020 Filed under: Agriculture, Finance | Tags: Common Agricultural Policy, European Parliament, Greenpeace Leave a comment
Conflict within the European Union over the future of the Common Agricultural Policy (CAP) reveals stark differences between ‘business as usual’ members of the European Parliament, and those wanting support to focus on small farmers, the environment and climate change.
“So what?” may be a UK response, given the UK’s departure from the Union, but similar tensions are likely to be felt in the countries of the UK too.
The three largest groups in the European Parliament are the European Peoples Party (EPP) with 187 of the 705 members, the Progressive Alliance of Socialists and Democrats (S&D) with 147, and Renew Europe with 108, totalling 442 or 63% of all the seats. The EPP is conservative, S&D is described as centre left, and Renew Europe is centrist, so together they cover a wide spectrum of opinion. Late in October they pushed through the European Commission’s plans for 2021-2027, which show little change from the current arrangements, and not nearly enough to enthuse Green politicians or environmental groups.
The Greens/European Free Alliance (67 seats) and the group including the Nordic Green Left (39 seats) were not numerous enough to influence the result.
The plans of the Commission – essentially the EU’s civil service – included a redistribution of payments per acre to give more to small and medium-sized farms, a minimum of 2% of support payments to go to young farmers, and restriction of support to ‘genuine farmers’. The proposals also included better protection for wetlands, encouragement for crop rotations to benefit soils, and more money for on-farm eco-schemes. The intended budget for 2021-2027 is €386.646 billion, split €291.091 billion for ‘Pillar 1’ and the balance for ‘Pillar 2’. Pillar 1, direct payments to farmers based on the area of their holdings, is 3.8% more than for 2014-2020. Pillar 2 is for rural development and environmental improvements, which in 2014-2020 received €95.078 billion, but for 2021-2027 is expected to receive €95.555 billion, barely an increase even at current prices (which ignore the impact of inflation).
Moves to bolster environmental schemes are too cautious, according to environmentalists. Thirty per cent of direct payments and 35% of rural development spending will require environmental justification, in the latter case up from 30%, but this means 70% of direct payments will be unaffected by any eco concerns, as will 65% of rural development expenditure.
Big farmers are the main beneficiaries of the CAP. Almost one third of payments go to 125,000 farm holdings, just 2% of the six million recipients. The 125,000 holdings each mop up over €50,000 a year. The 2021-2027 package is likely to impose a ceiling of €100,000 per holding, but the overall distribution is not expected to alter as much as small farmers would wish. The minimum size to qualify for any payment is up to the member states, but five hectares is a popular level, and has applied in the UK. This excludes many horticultural and start-up holdings.
Greenpeace complained that the new deal would be a “death sentence for small farms and nature” and billions of Euros of public money “will drive farming further into climate catastrophe”.
“The proposed common agricultural policy makes no effort to limit spending on industrial animal farming, and would prohibit national governments from introducing higher environmental standards that farmers in their country would have to meet to get public subsidies. The plan would scale down current requirements to leave space for nature on land farmed or to protect carbon-rich peatlands and grasslands,” worried Greenpeace, adding “The proposal would also set maximum national spending limits on some environmental programmes.”
Greenpeace would like the proposals withdrawn, and replaced by a new set focused on environmental improvement and climate change mitigation. But given the EU Parliament’s backing for the current agenda, significant change is not on the horizon.
See: http://capreform.eu/agriculture-in-the-european-green-deal-from-ambition-to-action/, 21st October 2020
www.greenpeace.org, ‘EU Parliament signs death sentence for small farms and nature, Greenpeace’, 20th October 2020, and ‘EU Commission must withdraw farm plan after Parliament failure, says Greenpeace’, 23rd October 2020
https://ec.europa.eu, ‘Future of the common agricultural policy’, accessed 26th October 2020
PDR
No Safety Net for Self-Employed when Tax Credits Cut
Posted: October 28, 2015 Filed under: Employment, Finance | Tags: Self-employed, Tax credits 1 CommentThe self-employed form a dark corner of the UK economy into which the Conservative government chooses not to peer closely.
The impact of tax credit cuts on the self-employed is a matter on which ministers have largely remained silent.
At the latest count, between June and August 2015, 4.497 million people were self-employed and 26.427 million were employees. One person was self-employed for every five to six employees.
All the rhetoric about coming increases in the minimum wage is irrelevant to the self-employed because they have to find their own wages. And it’s pretty likely that some employers will be encouraging employees to go off into self-employment, to lessen the impact on business profits of both auto-enrolment in workplace pensions (with compulsory employer contributions) and of the coming introduction of the ‘national living wage’.
If you are self-employed, the ‘national living wage’, starting in April 2016 at £7.20 for workers aged 25+, means nothing – and could even depress self-employment incomes if employers shed over-25s, increasing the numbers competing in the world of self-employment, which too often means casual shifts or short-term contracts.
The government includes the self-employed in its ‘jobs’ figures (creating a rosy image of plentiful job creation) but excludes them from workforce earnings figures (because they would depress those figures and prompt observers to ask how real the UK’s ‘economic revival’ really is).
The latest figures from HMRC for self-employment earnings are for 2012-13, and they show 897,000 cases of zero income, because the business made a loss, or its profits are offset by capital allowances or by losses suffered in previous years. Of the 5.76 million instances of self-employment – individuals in most cases – 1.99 million achieved annual income of less than £3,000, and the incomes of another 2.49 million were between £3,000 and £14,999.
At the other extreme, in 91,000 cases, annual income exceeded £100,000, and for this select group averaged £261,538.
The chart opposite shows clearly that the great majority of incomes from self-employment were very low in 2012-13, while a few, the 91,000, had earnings ranging from very comfortable to astronomical. The picture in 2015-16 is unlikely to be much different.
The self-employed are already poor relations in the world of welfare. No holiday pay, sick pay, statutory maternity or paternity pay, no entitlement to industrial injuries disablement benefit. No employer to make pension contributions on their behalf.
Many of the 4.497 million individuals who are nothing but self-employed — they do not also have a full-time or part-time job as an employee — have been able to survive only because of tax credits. The government’s argument that a higher personal tax allowance will help does not wash with those, probably over 3.5 million, whose total income is unlikely to reach the giddy heights of £11,000, the personal allowance from April 2016.
Some of the self-employed have pension incomes: nearly half a million are aged 65-plus, and most of these are likely to receive pension payments. That still leaves around four million self-employed individuals who are under 65 and in the main on very modest incomes. Yes, there will be under-reporting — cash-in-hand jobs, some illegal earnings — but the big picture is a dark one of an under-rewarded, reserve labour force for whom the national living wage will be a total irrelevance because they do not have an employer. Tax credits, on the other hand, are their lifeline.
More information
‘Self-employed workers in the UK 2014’, Office for National Statistics, August 20th 2014
‘Self employment income assessable to tax 2012-13’, Survey of Personal Incomes from HMRC, updated January 2015
‘Social security provision and the self-employed’, Social Security Advisory Committee, occasional paper no.13, September 2014
‘Summary of Labour Market Statistics’ table 3, full-time, part-time and temporary workers, October 14th 2015
Working tax credits are paid to working people aged 16-24 if they have a child or one of a range of disabilities, and to people in work who are aged 25-plus, whether they have children or not. Child tax credits are paid to parents, according to their income.
Upper thresholds for working tax credit are £14,000 for single people without children, £19,000 for couples without children, and £40,000 for families with children. The Daily Mirror has published a concise guide to the proposed tax credit cuts wanted by George Osborne, the Chancellor, but on which the House of Lords forced a rethink this week.
PDR
Worry About Deflation in a Debt-Ridden World
Posted: August 28, 2015 Filed under: Energy, Finance | Tags: Gail Tverberg. Deflation Leave a commentGail Tverberg, an experienced actuary, is essential reading for all who are concerned about our present impossible marriage between infinite growth economics and the finite world on which we live. Here she explains why plunging commodity prices are not the good news you might think:
PDR
Chancellor Caught in Debt Trap
Posted: March 17, 2014 Filed under: Economics, Finance | Tags: Budget, Debt Leave a commentFrom Surplus Energy Economics:
Oh Dear There’s an Asteroid Heading Our Way…..
Posted: October 5, 2013 Filed under: Climate, Ecology, Finance | Tags: Gail Tverberg, Richard Heinberg, Sustainable Development Commission Leave a comment…but let’s not worry about that yet, say the crowd in the pub.
An asteroid might or might not slam into Earth, but there are more immediate dangers to understand. Richard Heinberg — link below — argues that we must build more resilience into our straining, breaking systems — environmental, social, political, economic… In ‘Fingers in the dike’ on http://www.resilience.org, Richard Heinberg looks at the unpleasant interactions between energy, money and climate systems:
The ways that we compartmentalise and certificate knowledge are, I think, partly to blame for the difficulty we have in visualising our world as a complex adaptive system in which the linkages between component parts are as critical as the parts themselves. The people who analyse the functioning of broad systems, across the boundaries of traditional ‘subjects’ are often on the receiving end of academic and political marginalisation, sadly.
The Sustainable Development Commission had a greenwash type of name but, led by Jonathon Porritt, it acted as a subtle ecological conscience for the United Kingdom. It was an advisory link between government departments, and a reminder that systems do not stop at the exits of ministerial domains.
The commission was abolished by the Conservative/Liberal Democrat government in 2010. In fact, axing the commission was one of this government’s early acts, although the British people were told it would be the “greenest government ever”, a misleading statement which adds to the widespread distrust of politicians, and to apathy.
Both Richard Heinberg and Gail Tverberg (what is it about the bergs?) see clearly how systems form interacting hierarchies that should not be analysed solely in isolation from each other. Gradually the power of their arguments is gaining support from green-minded people.
Pat Dodd Racher
Curbing Banks’ Excesses: the Tide Begins to Turn
Posted: March 3, 2013 Filed under: Finance, Politics | Tags: Bankers' bonuses, European Parliament, Greece, Switzerland Leave a commentby Pat Dodd Racher
“If we cap bankers’ bonuses they will go somewhere else.”
Not me saying that, but lots of people in politics and finance.
They assume it is normal, praiseworthy even, for bankers — people — to place personal wealth above everything else. This makes bankers just like mercenary soldiers, but we don’t place those on a pedestal, do we?
The fiction that love of money is a value we should not question permeates so much of 21st century thinking that it was a relief to hear the European Parliament’s decision to cap bankers’ bonuses at 100% of salary, up to 200% with shareholders’ approval. It is even more of a relief to know that Swiss voters have told their government, in a referendum today, to introduce a law giving shareholders the power to control executives’ pay.
Bankers used to look after customers’ money and decide to whom to give loans, but machines have taken over those jobs. Too much of banking now is irrelevant to the real economy, and often socially catastrophic, such Goldman Sachs’ ‘structuring’ of Greece’s national accounts to make it look as though the country qualified for entry to the Eurzone. Yes, there was an apparent bonanza, but when the book-cooking pot boiled dry, the financial chefs were not handed the bill. There is a disaster in Greece: see http://www.globalresearch.ca/the-greek-catastrophe-economic-progress-built-on-rotten-foundations/5325030 and the Greece section in http://www.thenewamerican.com/economy/economics/item/14534-fiscal-debt-charging-ahead — just two samples of the troubling reports from previously comfortable, now dejected, disconsolate nations, like Portugal, Spain, even Italy. The bankers, though still take their bonuses, still live in bubbles protected by the wealth flows they have learnt how to control.
The Greek government, no government, should set out to defraud, of course, but the amounts that ministers and acolytes can siphon off are tempting, and will continue to tempt all the time that wealth endows power. Maybe we are starting to see a gentle turning of the tide, a slight weakening of the prestige we have accorded to immoderate wealth.
Maybe, hopefully, in the near future we’ll see more votes like those in Switzerland and in the European Parliament, and the hollow refrain “they’ll move somewhere else” will be relegated to history.
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