Cable Forum - View Single Post - Bank of England raises Interest Rate to 5%

007stuart · 22-06-2023, 13:57

Over many years, wages at the lower end of the employment market have been held down due the number of EU citizens prepared to accept pay levels that when compared to their home economy are high. Now that source of supply has effectively been stopped it is only natural that these industries to have to start paying more to attract workers. Also the UK rate of unemployment is currently 3.8% (source ONS), which in turn puts pressure on wages.

There are basically two instruments that can be used to control the economy, interest rates and taxation. The present government have nailed their colours to a low tax rate economy so all that is left is interest which is why we are at the moment.

As previous contributors have mentioned we have experienced a protracted period of low interest rates and this in itself has contributed to a staggering rise in property prices. It is certainly possible that there will be a drop, however that may prompt a return to "negative equity" very soon, which may lead to a repeat of the 2007/2008 crisis where many lending institutions ended up being insolvent and needed to use the Bank of England as a "lender of last resort".

So whilst a rise in income tax is never palatable it may be more equitable than base rate increases as there's evidence to show that those under 40 are more adversely affected by base rate increases as housing costs take a greater proportion of their disposable income than those in the over 40 age group.

22-06-2023, 13:57	#5
007stuart cf.addict Join Date: Feb 2011 Location: Glasgow Services: TIVO V6 Meg Service TV XL Virgin Phone Home & Mobile My wife says I have too many SONOS units Posts: 434	Re: Bank of England raises Interest Rate to 5% Over many years, wages at the lower end of the employment market have been held down due the number of EU citizens prepared to accept pay levels that when compared to their home economy are high. Now that source of supply has effectively been stopped it is only natural that these industries to have to start paying more to attract workers. Also the UK rate of unemployment is currently 3.8% (source ONS), which in turn puts pressure on wages. There are basically two instruments that can be used to control the economy, interest rates and taxation. The present government have nailed their colours to a low tax rate economy so all that is left is interest which is why we are at the moment. As previous contributors have mentioned we have experienced a protracted period of low interest rates and this in itself has contributed to a staggering rise in property prices. It is certainly possible that there will be a drop, however that may prompt a return to "negative equity" very soon, which may lead to a repeat of the 2007/2008 crisis where many lending institutions ended up being insolvent and needed to use the Bank of England as a "lender of last resort". So whilst a rise in income tax is never palatable it may be more equitable than base rate increases as there's evidence to show that those under 40 are more adversely affected by base rate increases as housing costs take a greater proportion of their disposable income than those in the over 40 age group.