Disastrous figures from Darling

According to the Pre Budget book the revenue loss next year, 2009-10, will be a stunning £72.7 billion. £8.6 billion of that is the policy change on VAT. The rest is the impact of the recession on Stamp Duty, NIC, Income Tax, Corporation Tax and the rest.

The borrowing this year was said by the Chancellor to have almost doubled to £78 billion. This figure left out buying bank shares and other expensive financial transactions. At the back of the Budget book it tells us the “Net financing requirement” is an astonishing £157.7 billion for just the current year. The Gilt market is going to be working overtime to try to supply all this money.

I was forecasting £140 billion (my £120 billion forecast plus the £20 billion budget packages). Gilt redemptions and other items take it over that to nearly £160 billion. The Treasury is gloomier than I have been about the outlook for revenue, given the downturn.

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6 Comments

  1. Posted November 24, 2008 at 8:42 pm | Permalink

    I am old enough to remember Labour in the 70,s and all that is happening now has that same feel . I do fear for the future of my Country . The Government is saddling my Grand Daughter with debt, and she is only 8!!

  2. Posted November 24, 2008 at 8:51 pm | Permalink

    I am afraid that the rest of the world will not accept this level of borrowing, nor will they accept the very over-optimistic forecasts. It requires but one tiny breath of wind and the whole socialist edifice will collapse.

  3. Posted November 24, 2008 at 10:10 pm | Permalink

    The most worrying thing is not the size of the projected deficit, we all knew it would be huge, it is Mr Darlings bizarre forecast for the economy to grow in 2010 after just a small decline in 2009. Both seem to be wildly optimistic yet he bases all his calculations on their accuracy.

    A recession deeper than 1.25% of GDP and the black hole will reach unimaginable proportions, no recovery in 2010 and at least five years of austerity budgeting will be unavoidable.

    The government is pursuing a scorched earth policy of quite frightening magnitude.

  4. Posted November 24, 2008 at 11:12 pm | Permalink

    How is Darling able to say that borrowing this year is £78billion when the Budget book has a figure of £157.7billion? We are used to the Labour ploy, exploited every year by Brown as Chancellor, of giving out headline news and leaving the full story hidden amongst the pages of the Budget book. It seems that nothing has changed with Chancellor Darling.

  5. Posted November 25, 2008 at 9:08 am | Permalink

    Public spending growth should be virtually zero in real terms until the budget deficit is wiped out. IT schemes , New Deal , ID Cards, QUANGO's , Regional Development Agencies , wasteful public procurement policies , civil service recruitment , high public spending on transport ( when private funds will do ) , aid for places like China & India that do not need it , farm subsidies that harm the Third World , public sector pensions with a retirement age of 60 with excess state contributions and Incapacity Benefit being used as an early retirement option for those who can work are areas where a hatchet needs using.

    On QUANGO's they should be told by the state that unless they cut their budgets by 25% within three years they will lose all public money and have to sink or swim on the basis of charging fees for their services. Replacing JSA & IB with one sort of payment designed to slash economic inactivity would stop cutting public sector employment adding to the dole queues long term. The QUANGO plan alone would reduce borrowing & spending plans by £25 billion. If NHS funding went up by inflation rather than by 2% plus prices then £7 billion p/a would be saved as cash from cutting management , procurement costs and health authorities could be moved to the frontline while getting the cash to follow the service user the NHS would have to deliver better services or lose cash to the private sector. That would get better value for money on the NHS as waste would be cut out with money moved to treating more people while expenditure was frozen in real terms.

    If your hospital cannot treat you within a short space of time you should be able to take the cash that the state ought to have spent on your care into the private sector instead – faced with losing money the health service would raise its game. Spending £7 billion a year less would be wise in the current situation and after the vast rise in health spending we surely should get value for money on that rather than wasting a load more ?

    This harsh slash & burn plan should start being phased in from 2010-11 onwards with a view to balancing the books sooner than Labor plan to. Economic stability & future prosperity are under threat if Big Government & rampant public borrowing are not radically reduced.

    It should be possible to virtually freeze public spending growth for three years while redirecting some economies to extra defense spending. We do not need more police – we just need them to spend less time on pen-pushing and more time on the beat.

  6. Posted November 25, 2008 at 7:56 pm | Permalink

    What comes across time and time again is the sheer old fashioned simplicity of economics. Although it is dressed up in clever words, the old truths still stand. (Don't borrow at high rates of interest. Don't borrow too much, etc.) I have noticed that when I do not feel right about it in myself, that something is going very badly wrong.
    At the moment the taxation system is far too complex. It could be radically simplified and now could well be the time to do it, as the take drops catastrophically, just at the time when it ought to be growing fast.
    If there was just one income tax for everyone at a fixed rate, then anyone could see who was and who was not paying it. The government, in the budget, after a discussion in parliament, could discuss this and, perhaps even, in good years, allow exemptions for the very poor. (The Poles did this: now they all live in Poland where the Zwoty is, apparently, in pretty good shape).
    VAT? Problems with Europe, of course.
    National Insurance? Well, like the road tax, where does it all end up?
    Hand-outs: the dole, incapacity benefit, welfare for the elderly? How about getting private people to do this?
    At least some attempt at managing the thing is urgent.
    The incentive for these ground breaking ideas could easily be the elimination of the government debt.
    I think, myself, that this is an excellent time to plan and to bring in some fresh thinking. It's a bit like winter: that's when you plan the allotment for next year.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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