Deficit reduction – the 2010-11 story

 

              Today we see figures for the state of the public finances over the last financial year, 2010-11.

              Current public spending is up by 5.1%. Tax revenues are up by 6.9%. Additional  Public Sector Net borrowing after financial sector interventions  falls from £156.5 billion 2009-10, to £141 billion 2010-11.  In other words every man woman and child owes £2350 more this April than last April if you share the government borrowing out equally.

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21 Comments

  1. Stuart Fairney
    Posted April 21, 2011 at 11:47 am | Permalink

    You know full well we will never pay* this back.

    You know the forward commitments of social security will never be paid* simply by virtue of demographics.

    You know there is a manifest if undeclared BOE policy to tolerate inflation to erode the debt which explains negative real interest rates of around 4.5%

    You know this cannot encourage deferred consumption in the form of savings which is where investment capital comes from.

    Are any of these statements false?

    (* meaning paid in a real, non-inflated sense as opposed to monetising the debt by QE policies).

  2. lifelogic
    Posted April 21, 2011 at 11:51 am | Permalink

    Best to leave now clearly there is clearly no real determination to cut the state down to size – it will continue to grow until it kills the animals on which it parasites. And then we have Labour to look forwards to before May 2015 . I can’t see many sane people wanting to invest in the UK when there are so many better places to invest.

    Why are HSBC and Barclays still there I wonder – just the last bit of inertia I assume.

    • Stuart Fairney
      Posted April 21, 2011 at 2:01 pm | Permalink

      I did wonder about this given the obvious and manifest advantages of a small state. But then it occured to me, outside of a group of silly lefties who actually believe the state “works” the rest of the political elite* do very well indeed out of it. The state goose lays them a golden egg, so why on earth would they get rid of it?

      They won’t change until they are absolutely forced to by bankruptcy of currecny destruction.

      (* I exclude from this group a very few MP’s and peers, our host being an honourable, if all too rare exception).

    • lifelogic
      Posted April 21, 2011 at 8:45 pm | Permalink

      Does the human rights act not cover the mortgaging of our unborn children by Cameron in this way? The judges seem to have stretched it to cover almost everything else after all.

  3. Posted April 21, 2011 at 12:26 pm | Permalink

    The economic effects of tax rises lag the rises themselves. So a 6.9% increaase in revenue on back of some tax rises cannot be sustained.

    The recession is not cuased by bankers, fat cats, Zurich gnomes or whatever. It is caused by burgeoning bureaucracy an even more by the destructive Luddite restraints they produce on economic freedom. Until government decides we should be free to have inexpansive nuclear power and a number of other market freedoms we will not get out of recesion. Despite speeches promising this virtually nothing has been done over the last wasted year.

    • sjb
      Posted April 21, 2011 at 10:21 pm | Permalink

      Mrs Thatcher, a keen promoter of nuclear energy, wanted to include Britain’s nuclear plants in her government’s electricity privatisation programme. But she decided not to when the private sector baulked at the risks and high costs of nuclear power.

      Bearing in mind she was a scientist earlier in her career, I have always been curious about why she did not put, say, 5% of the revenues from North Sea Oil into the hands of scientists to carry out research into alternative energy sources.

  4. zorro
    Posted April 21, 2011 at 12:26 pm | Permalink

    It’s the government’s debt, not mine. I actually owe nothing to anybody. If the government taxes me too much, I will leave. It should consider spending less. I am sick of money being wasted on no-hopers, spend less on them.

    zorro

    • sm
      Posted April 22, 2011 at 1:32 pm | Permalink

      Which bank are you talking about?

    • Stuart Fairney
      Posted April 22, 2011 at 9:26 pm | Permalink

      True enough, the only problem is, they are the ones with guns and coercive power to extract money and compliance from us.

  5. Peter van Leeuwen
    Posted April 21, 2011 at 2:40 pm | Permalink

    Doesn’t this mean that the UK actually increases its spending more than the EU proposes for Europe? (5.1% versus 4.9%). This is a fair comparison as the EU can not borrow money or run a deficit.

  6. norman
    Posted April 21, 2011 at 3:48 pm | Permalink

    There may be a living standards squeeze going on for us poor plebs but a 6.9% pay rise isn’t to be sneezed at! Let’s hope for all our sakes that next year the Chancellor is a little less generous in granting his government a pay rise paid for by the aforementioned plebs.

  7. Brian Tomkinson
    Posted April 21, 2011 at 3:53 pm | Permalink

    Sadly, you tell us nothing we don’t already know. Not very nice to be reminded that after the extra tax take by the government we are all worse off and will be far more worse off after 5 years of this or any UK government, when our debt will be 50% higher, along with the corresponding interest payments. Just why the markets think the UK is taking the correct action when the government is determined to continue to spend more remains a mystery to me. Too much talk about deficit and not enough talk about debt. Readers should be interested in the scale of the problem facing the USA also

  8. alan jutson
    Posted April 21, 2011 at 4:31 pm | Permalink

    This news is shocking news indeed, it has been forecast by yourself for very many months, but what did the TV News presentation make of it all this lunch time.

    Retail sales held up better than expected last month !

    So thats all right then. No mention that government spending is increasing, no mention that our debt is getting worse by the hour.

    The sun is shining, so let us all have a few days off to enjoy the weather !.

  9. Posted April 21, 2011 at 4:54 pm | Permalink

    I don’t know why anyone is surprised by this! Cameron and Osborne have announced reductions in the share of the size of the state of an absolute minimum to keep the financial markets reasonably happy. If anyone seriously thought that a Lib-Con coalition would actual cut nominal spending then they need their heads examined.

    The fact that tax revenues are up shows that the economy is growing and that the increase in VAT did not have a negative Laffer effect. This has got to be, if not a good thing, at least not a negative thing.

  10. Posted April 21, 2011 at 6:05 pm | Permalink

    “Current public spending is up by 5.1%.”
    Where are the cuts that I keep hearing about?
    Why should public spending go up faster than my pension?
    Has the increase demanded by the EU been accounted for?
    Is there any difference happening between what would have occurred under Labour and what is taking place now?

    I don’t believe that we have a Conservative Government, its all some sort of illusion!

  11. REPay
    Posted April 21, 2011 at 7:15 pm | Permalink

    It is a conspiracy of the public sector (an its index-linked liabilities) against the private sector. Pretty much the standard post-war history of UK public finances…

  12. JimF
    Posted April 21, 2011 at 8:37 pm | Permalink

    The other calculation of interest is whether, in inflation adjusted terms, every man woman or child owes more this April than last. Your government’s covert task is to raise inflation and level out spending so that this figure starts to reduce without too much sudden pain and angst.

    In the long term, as you know, our currency will be destroyed and confidence to save and invest will be lost.

  13. NickW
    Posted April 21, 2011 at 9:58 pm | Permalink

    The Coalition has missed an important point.

    My daughter’s headmaster wrote to all the parents of children at his (1200 pupils) school to ask them to write to their MP to complain about the cut in the school’s budget, and its effects.

    Someone should make sure that all schoolchildren know that Government borrowing has to be paid for and that it is them who will have to pay it.

    As a point of interest, at a recent parents evening I mentioned to the teachers that we would appreciate having text books available for the children to take home, and that I was perfectly willing to contribute to the cost. The teachers replied that many other parents had said exactly the same.

    It is up to the politicians to take it from there. I have no objection to contributing to a text book fund which provides books for everyone regardless of whether they pay into the fund or not.

    School heads and Governors need to start thinking out of the box and find innovative solutions to the problems inherent in necessary financial economies. I think many of the wider public has got there before them.

    • Stuart Fairney
      Posted April 22, 2011 at 9:29 pm | Permalink

      Just ignore the school, buy the text books then sell ’em on Amazon when they are no longer needed.

  14. Posted April 21, 2011 at 11:46 pm | Permalink

    When it all gets too much I at nearly 66 will likely (protest – ed),in a very public way and hope that I spark a revolution against our rulers at least twice as big as the Libya one of now.
    If that results in an enormous loss of everything those left behind will know their apathy caused it.Maybe then a new beginning will happen,the state is like a giant millstone around the neck of the people pulling all down into the abyss.When I came through Gatwick on 24th April 2008 from South Africa after 27 years One Pound cost me R17.4,today it is around
    R10.8,yet I know that the predictions of the Rand’s value when Cape Town bid for the
    Olympics and lost was for a value of at least R11 to the dollar or over R20 to the £,that is the extent of the destruction of this country’s currency and by extension of the country.

  15. Posted April 22, 2011 at 10:22 pm | Permalink

    Inflation from FYR 2009/10 to FYR 2010/11 has been conservatively estimated at 4%. In other words, the currency is being rapidly debased and raw cash figures have no practical meaning. If you correct for inflation, public expenditure has risen by 1.1% and taxation by 2.8%. GDP growth seems to be running slightly ahead of public expenditure growth, although we could do better.

    The good news is on deficit reduction. If you correct for inflation, the 2010/11 deficit is 13% lower than the 2009/10 deficit. Not bad considering that we only had scope for an emergency budget to amend Labour’s. The first opportunity to judge this government’s economic performance will be in April 2012.

    We must be grateful for this coalition government, which is trying to tackle our problems. In contrast, the USA is being run as the UK would have been run had Gordon Brown remained in office. Watch this space.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

    Promoted by David Edmonds on behalf of John Redwood both of 30 Rose Street Wokingham RG40 1XU

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