Amidst all the talk of billions and trillions the truth is often a casualty. Few in the public debate seem to grasp the overall numbers, or see how the adjustment to lower borrowing will in due course be made by forecast higher tax revenue. It might be helpful to set out the Uk figures expressed as so much per head. I have based all these numbers on a UK population of 62 million. The numbers beneath are the averages for every man, woman and child in the country.
The UK this year is estimated to earn or produce £22,984 of income per person, before public borrowing and associated spending is added on.
The public sector will account for half of this , or £11,451 spent per head.
We will pay £9065 of tax on average.
£1968 of public spending will be paid for by borrowing. The balance is paid for from other receipts.
The current debts, unfunded public sector pension liabilities, and bank liabilities owned by the government amount to more than £50,000 each.
The additional debt of £1968 each adds another 8.5% to total Uk spending, and an additional 17.2% to public spending. In other words, if the government manages to get borrowing down to the target level this year it will be borrowing one pound out of every six it spends.
This will be an improvement on 2010-11, when the government borrowed one pound in every five it spent.
Tax rises from £7,900 in 2009-10, the last Labour year, to a forecast £10,677 in 2014-15. That’s an increase of 35%.
August 26, 2011
Although our income per head will doubtless be larger in this and future years than in 2009-10, the 35% increase in tax still looks extremely hefty, especially for a Tory-led government.
But I see also the extraordinary size of debt and the rate of continued borrowing which both can be translated as future taxation = robbing our children.
So it seems that due to our past profligacy, or that of our erstwhile governing representatives, we should in all conscience make a priority in ensuring we bequeath less of a financial load to future generations. Our present or even further increased taxes seem essential, dammit, but all the more the need also for truly severe reductions in the spend on the public sector.
August 26, 2011
Or does the 35% just mean that the BoE/MPC have an unstated nominal GDP growth target, rather than an inflation target?
1.06^5 = 1.33.
Is the cat out the bag? Keep nominal gdp growth in the 6% region, whether this involves inflation or not? (Assuming JR’s numbers are nominal, I haven’t checked.)
August 26, 2011
I remember the promise of 80% deficit reduction by cuts and 20% by tax increases. Well we’ve had the tax increases on income tax, NI stealth and VAT. When are the cuts coming? We need to get our state spending down to a maximum of 30% of GDP, fullstop. We simply can’t afford to keep borrowing.
All I see is more of the same. If thats tha case, why bother voting for the Tories in the future if all we get is ………the same old tax, spend and waste?
August 26, 2011
That is an excellently clear way of putting it so thank you for working it all out. Hours on the calculator no doubt!
So it is absolutely vital that we cut back the borrowing by cutting back stupid salaries, redundancy packages and expenses, by controlling local government and by stopping vast new expensive projects which nobody wants. The amount of wastage in the system at County and London level are preposterous.
We are become a nation of beggars.
August 26, 2011
Take a look at Richard North’s EU Referendum blog. He’s giving an excellent account of the wholesale looting of the public purse being effected by Quango redundancy payments, and continued upping of top Council officer salaries. The sums are so appalling that looting is the most appropriate description of this transfer of wealth.
Worse, there seems to be no will to deal with this, and no will to put through what the Coalition promised. The bonfire of the Quangos has been no such thing, with a good 3/4 of those we were told would be shut down still active, or transferred, lock, stock, barrel, staff and outgoings into other Quangos.
Indeed, it would seem that those responsible for the dreadful mess we are in are still ploughing on, making matters worse, taking more money off us, whilst the rest of us are being exhorted to help the economy mend by spending. Sadly, many many of us struggle just to pay for the basics – food, fuel and energy.
Big government not only doesn’t work – it makes matters worse. Much worse.
August 26, 2011
Beggars, state sector spongers, benefit spongers, tax exiles and black marketeers. All reacting to the Cameron/Osbourne fiscal system and poor government control – exactly as you might expect them to.
August 26, 2011
Excellent summary to cheer us all up or persuade us all to leave.
It is not even the case that the government is spending most of this money on anything particularly useful in general. Much is spent inconveniencing the productive.
Could we have a non socialist Tory government please, for a change, that actually wants to address Gordon/EU/Big State mess?
August 26, 2011
I notice publicity for some successful people who did not do well at school. I assume to cheer up some who are disappointed with their GCSE results. Unfortunately it includes such people as Major, Prescott and Alan Johnson so hardly an uplifting or pleasant vision.
Then again the ones with good Oxbridge degrees like Denis Healey, Cameron, Clegg, Cable, Clarke and Huhne (indeed PPE in particular is often a problem) are often just as out of touch with reality and perhaps rather more dangerous in general to the world.
August 26, 2011
It is reported that the cost of insuring RBS bonds against default is now £662,000 PA on a £10m holding of the bonds.
Surely a bank needs to be rather more solvent than most of its borrowers otherwise it is about as much use as a chocolate tea pot but you can’t even eat it.
Can the government not do something to get sensible banks in shape and lending again so that the countless good private projects put on hold for lack of funding can be started again and people got back to work.
August 26, 2011
All the banks are hopelessly insolvent because what they are counting as assets (sovereign bonds, bank bonds etc.) are in fact vastly overvalued on their books.
The Western governments cannot set up solvent banks because they too have no money and the amount they can borrow is limited by the credibility of their taxation plans.
China has money-but it is invested in US bonds- so back to the point that the assets aren’t worth what they are on the books at. In any event the Chinese government cannot be seen to be too helpful to the West when much of its population is poor.
Eventually the boy shouting that the king is naked will be believed-and nobody know what happens after that- even if they tell us that they do.
August 26, 2011
it is not that PPE degree holders are out of touch per se – but that the entrance on this combination often betrays a precocious teenage desire to be a politician.
I do not generally adjust my philosophical beliefs in thrall to Billy Connolly, but he once said the desire to be a politician should disqualify you for life from ever becoming one.
in respect of spotty teenagers making five year plans to No 10 on the back of their Student Union beer mats I think I agree with him.
August 28, 2011
it is not that PPE degree holders are out of touch per se – but that the entrance on this combination often betrays a precocious teenage desire to be a politician.
Not true ! Harold Wilson was taking History when PPE was introduced in 1936 and switched. It is the Economics Degree at Oxford which had to be combined with Politics and Philosophy for the First Year at least. 40% PPE students today at Oxford are non-British.
The Politics section has most options because of the ’68ers, and the Economics Section needs expanding. The maximum we could take was 5 of 8 Finals Papers in one subject, mine was Economics
August 28, 2011
Thanks for the information. Hopefully not to much of the lets get government to tax and borrow huge sums and then pay people to dig holes and fill them in again economics.
August 26, 2011
Bazman types who still seem to think that – governments spend more efficiently that tax payers – should perhaps look at the Edinburgh tram system. Now pushing £1Billion for about about 9.5 miles of pointless, hugely loss making tram track “investment”.
A tram (for any who do not know) is a very inefficient and vastly more expensive bus (much beloved of the parasitic sector as a job creator for them) – and that is limited to one or two track routes.
Doubtless Huhne would approve.
August 26, 2011
Cambridgeshire has it’s own guided bus fiasco combining the disadvantages of a tram with the disadvantages of a bus. Never worked anywhere in the world, but will work here as soon as the legal dispute over bad workmanship by the contractor is sorted out, and the taxpayer has paid up one way or another. So no. I don’t believe the government spends more wisely than private industry, but would we have a railway system without the state? The answer is clearly no.
August 27, 2011
Then why do you seem to think that the state is better/more efficient at proving health/education than letting people use their own money directly without the waste of the government in the middle?
August 27, 2011
Without state support we would still have many London and other commuter routes and certain intercity routes which would perhaps be about the best level of train provision for a small country.
August 27, 2011
Withdraw all subsidies to the rail industry then and see how much railway there would be. Next to none except the most profitable commuter lines being plundered with little safety. The rest would have been sold of for land and scrap. Any questioning of this would be met with” We have a railway to run” Sound familiar?
August 26, 2011
It would be a significant step forwards if they understood the difference between debt and deficit.
August 26, 2011
Have a look at James Delingpole’s Open Letter to Dave Cameron in the Spectator.
August 26, 2011
Indeed very accurate see also the sort of sensible response he hoped, against all expectations, to receive.
http://blogs.telegraph.co.uk/news/jamesdelingpole/100101956/an-open-letter-from-my-old-mate-david-cameron-to-the-people-of-britain/
August 26, 2011
I followed the lead and have read Delingpole’s letter, and an interesting read it is.
He challenges Cameron to call a general election, but if Cameron, as Leader of the Opposition trying to take power, couldn’t or wouldn’t argue the case as per Delingpole, he is never going to do it as Prime Minister.
Perhaps a more pertinent question would be to ask why is the Conservative party in power not the Conservatives most of their supporters were hoping for. Where lies the real power?
August 26, 2011
Good isn’t it!
August 26, 2011
Brilliantly simple analysis. And spot on Mick – sometimes I despair!
August 26, 2011
There you go. It’s only public sector worker pensions that count such as ourselves. Just in case though, we will make sure the MPs fund is fully funded and if that fund doesn’t work, well we will just repeat what we did last time, and vote ourselves more cash.
State pension? Nah, that’s for the little people. Lets not acknowledge that as a debt, and we can then say we don’t have to pay it.
State second pension, put that off the books too. That’s for little people too.
Total debt, 225,000 per taxpayer, since its only taxpayers that get forced to give you money.
There is going to be a middle class revolt.
August 26, 2011
“There is going to be a middle class revolt”.
I doubt it from the way people voted in England in 2010, but we can always hope, a bit like a million on PBs.
August 26, 2011
I would revolt if I could be bothered. In any case it looks like I won’t have to as I pay for a whole class to do that for me – and hey ! I’m not middle class anyway. So why am I being taxed as though I am ?
I think we’re all worldly enough to know that there’s not going to be a pretty ending to all of this.
August 26, 2011
Yep Nick ,
The elephant in the room is the total lack of savings for old age for those outside the public sector .
Assume that for Britains of 30 years of age or younger (which will eventually be the entire population) , 50% will live in rented accomodation their entire life .
Assume 1/3rd of the population are of retirement age and unable to find/do work . Using J.R.’s figure of 62 million this is 10.3 million people .
Lets say on average people manage to save up+inherit £100k . At age 68 that will give them an annuity of 4k + a state pension of 6k .
Assuming 9k goes on rent , and 1k on council tax , energy prices triple so another 3k goes on energy , plus a further 4k for food clothing etc we come to a total of £17k . So there would be a £7k shortfall .
So the deficit per year = 10.3 million * £7k = £72 billion
Once homeowners are included in this and if saving becomes almost impossible the figure could triple .
Homeowners will surely be required to use up the equity in their houses .
There is nothing inherently wrong with this but it means their children will inherit less increasing problems elsewhere .
Even with a crash in house prices which is innevitable as the UK becomes a less attractive place to live houses will still cost money to maintain as they get older and run down .
Surely better to build lots of social housing which would at least ensure that the capital remained in the UK .
A large proportion will be badly in debt by the time they reach 68 if they haven’t already serially gone bankrupt to escape them .
A country with our climate and size is unviable long term with a population of 62million or whatever the true figure will be in 30 years time .
August 26, 2011
No savings for the state sector pension liabilities either – just an empty promise which will need to be “adjusted”.
August 26, 2011
Hopefully, while we still have a middle class.
August 26, 2011
Middle class – this mis-classification has been the biggest con out.
At the turn of the last century the middle class had live-in servants and kitchen staff.
The most successful con trick has been to convince us all that – because we buy our own ex-council houses – we are middle class.
This makes us proud of our tax bracket when in fact we should be angry about it.
August 26, 2011
That point about loading the next generations with debt seems to be irrelevant to many left-leaning people. People born in the last sixty years spent many years paying off the ruinous costs of defending ourselves in World War II. However much it cost, it was worth it.
The same cannot be said of more recent public spending. The education service spends more and produces fewer literate, numerate children. The health service has received a massive inflow of money, and has wasted a lot on dodgy IT systems, or on paying huge salaries to doctors to do less, and in boosting the wages of everyone working in the NHS. Health ‘outcomes’ have improved, but the improvement has been tiny compared with the money spent.
I was surprised to see the Chief Executive of Basildon Council receives a salary double that of the Prime Minister. In the Civil Service there was an attempt to analyse the complexity, difficulty, responsibility etc of each past and allocate a grade and salary to it. On what possible grounds can looking after Basildon equate in any way with what the PM’s job entails? Is the added value of Basildon’s CEO ever analysed? If the CEO was paid, for example, half of the PM’s salary how differently would she perform?
Add to this the amazingly expensive private finance initiative and we have a cocktail of massively wasteful public spending, as if there was no tomorrow. I know we’re all dead in the end (thank you Mr. Keynes for this insight), but surely the next generations deserve the chance to live their lives without our massive, wasteful debts around their necks.
Ed Balls is thought of as a bright, posh bloke, but to deny the very existence of the UK’s structural deficit looks like the statement of a not-very intelligent person.
Quite right we need to separate the debt from the deficit. But the critical factor is the interest rate the markets charge – and if Ed Balls has been in power, and had kept up the drunken-sailor spending of the past 13 years, goodness knows what the markets would have done. I strongly suspect that our interest rates would be much higher, and we’d be looking for an IMF bailout like we did all those years ago when Labour ran the economy into the ground in the seventies.
I know being being party political is frowned upon, but what is the electorate to do – allow Labour to test their tax and spend on the nation to destruction? No thanks. Not to mention their plan to create their client-state. No thanks to that, too.
August 26, 2011
Very good analysis that even I as an accountancyl illiterate. A radical solution would be to raise VAT to cover the difference, then more taxpayers would certainly look with a jaundiced eye at all government expenditure. Even the BBC might realise a reason for cuts. (One can dream).
Problem with VAT, some of it is money for Brussels. Oh perhaps we could leave the EU, how much of our deficit (not debt) per year would that save?
August 26, 2011
“The current debts, unfunded
public sector pension liabilities, and
bank liabilities owned by the
government amount to more than
£50 ,000 each .”
That’s just govt debt. The private sector debt is nearly 5 times that, according to Mckinsey. £250,000 for each man woman AND CHILD, is a disaster.
August 26, 2011
Simply depressing.
If only the media, TV and Radio presenters had put this so clearly to those in power over the last couple of decades with rather more forensic factual interviews, than simply making clever opinions, we may have at least shamed them into perhaps more positive action.
This has been financial mismanagement on a huge scale, any Company Director would have been banned from holding future office if they had made such a mess of their Company finances on the way to its bankruptcy.
Its simply a disgrace that our political system allows this to happen.
Yes I know its not just here, but also in many other places all over the World, and that is the problem, Political leaders and Chancellors appear to live in another world to the rest of us, they seem to have too cosy a relationship with each other.
Not many political leaders retire poor, it is the citizens of each country who pay the price.
August 26, 2011
“Tax rises from £7,900 in 2009-10, the last Labour year, to a forecast £10,677 in 2014-15. That’s an increase of 35%.” [JR]
You got into trouble last time quoting cash (nominal / current) values for future years. In this case GO will come back and say it is 19% at constant 2009/10 values. He will always use the metric that gives the lowest number, knowing the UK media will not bother to question it; even if they understood it.
August 26, 2011
Interesting and depressing as the figures are the financial wizards do not seem to have the answers to sort it all out.
The solution is that we need to manufacture more. Part of the problem is the free trade concepts pushed by America so that its large corporations could manufacture cheaply in the east and flood the world their goods. The concept seems to have back fired, the west no longer has any money to buy the goods because of the trade imbalance.
I have long held the belief that if we wish to maintain those things we deem as essential parts of our society, such as democracy, good education, the NHS, pensions, social security and a clean environment then we need to protect ourselves from the (low wage-ed) nations like China.
The things we value cost money. It is physically impossible to increase our productivity to compete with China where life, in all aspects, is cheap.
One solution is introduce import duty against Chinese manufactured goods at a sufficiently high level to compensate for the differences in culture. It would be best to introduce it at a European level, though it could done at a UK level.
People will immediately say that China would retaliate by buying less from us. So what, they have no intension of buying from us unless its high technology equipment they cannot build themselves. And then its only bought with the intension of copying it. We sell more to Ireland than China.
A second solution to our woes is to encourage a made in Britain or Europe policy.
My partner recently had an operation in hospital. In the short time I was there I was gobsmacked at the amount of waste, everything is thrown away other than gowns and sheets. All of the throw away stuff is made overseas. For instance dressing supplied by Smith and Nephew were made in China.
I think the NHS is big enough to say to these suppliers that if they want to continue selling these goods they must be made in the UK. It will cost the NHS a tiny fraction more but will cost the UK less. Yes its against EU policy, so what, policy can be changed its not a fundamental law of nature.
Many years ago I worked in a 3rd world country. The Government said to the motor manufactures that if you wanted to continue selling cars then 85% by value had to be manufactured in the country. No manufacture left, businesses are always greedy to supply a market.
Europe could adopt this approach, if you want to sell in Europe then make it in Europe. To their credit the Japanese already do with the likes of Toyota and Nissan.
If we wish to maintain our way of life we need to accept that things are going to cost a little bit more.
August 26, 2011
Correction should have said No manufactureR left the country, that is they all stayed.
August 26, 2011
Love the pound shops me.
August 26, 2011
Total debt (excluding hidden debt like PFI, pension payments) doesn’t matter a whit, we cannot pay it back and have no intention of paying it back.
The only number that really matters now is interest payments and that is one area Osborne can justifiably say he has done a good job. Once the rates start getting high, as we’re seeing with Italy, Spain, Greece, Ireland, Portugal, the situation can quickly turn ugly.
They have the ECB that can buy bonds to temporarily supress rates, not quite sure what our exit strategy would be.
August 26, 2011
Do your colleagues in government understand the significance of this – and if so why are they not addressing it adequately? They have squandered a year in office and before too long they will be worrying their little heads about how they will be re-elected. If they haven’t made real headway in sorting out this financial mess they have no chance.
August 26, 2011
Hmmm…
That means that the 10% of the population that currently ‘work’ in the Public Sector actually spend half the money!
Should we actually count these ‘workers’ as actually contributing to GDP?
Furthermore, surely their taxes and NI payments are only re-cycled – i.e., they don’t really pay tax!
Again, hmmmm….
Reply: Not quite – the public sector figures include a lot of transfer payments as benefits and pensions to non state workers.
August 26, 2011
Hi John, I wonder if soon, you could do a blog about the true scale of national debt in this country, currently? Look out for my comment on that one!
August 26, 2011
The problem is not a lack of knowledge, usually, but a clear intent to spread disinformation. You can’t argue with the facts, so some politicians are better off not bothering to use the facts at all.
August 26, 2011
Truly staggering, and life goes on with Keynesians and their buddies the Monetarists still in charge of the money box
August 26, 2011
A 35% increase in taxation from an administration that promised the deficit reduction would be 25% by tax increases and 75% by public spending cuts. How utterly depressing. Of course, both spending cuts and taxation increases will depress economic growth, but any right-minded Conservative believes that people can spend money far more sensibly and usefully than government. It is, after all, their own hard-earned money that they are spending, whereas government (at whatever level) appears to believe that it has some God-given right to throw our money at its favourite causes, no matter now unpopular they may be (Overseas Development being but one obvious example). This is a recipe for disaster, but looking ahead perhaps that is what Osborne is after, an excuse that everything else has failed, so let’s turn on the printing presses full time and inflate our way out of debt? Weimar Britain is coming – get out of Sterling.
August 26, 2011
John, thanks for putting into an understandable perspective for those like me battered into insensibility by other accounts quoting telephone number size of money. Closer to home, I believe that part of our Council tax is used by County and other Councils to fund the existence of quangos like the Local Government Group (LGG) who simply ignore government and continue to award themselves obscene salaries.
It is quite clear that the LGG and a raft of other quangos are out of control and it is time that the government reigned them in. In the case of the LGG and ACPO, for example, why cannot the government simply direct that they are to be self-funded and if they cannot continue on that basis, to be wound up? Why on earth should we continue to pay through our Council and income and other taxes for these people who arrogantly ignore the government and our dire financial state and do nothing other than serve their own selfish purposes?
August 26, 2011
Thanks for the numbers and especially their expression as fractions.
I suppose we should be heartened that the government has been having to borrow only a fifth of all the money it’s been spending, rather than a quarter, and that fifth will drop further to a sixth …
No sensible household would ever manage their finances on the same basis as the government, not unless they knew for sure that quite soon there’d be a large capital sum coming their way and then they’d be able to pay off their debts.
August 26, 2011
Thank you for those calculations. Can you confirm that these exclude other cost burdens on the consumer, legislated by Parliament but not classified as taxation? I have in mind hidden costs like the feed in tariffs (FITs) introduced to save the planet (allegedly). If my assumption that they are not included is correct, are you able to calculate the costs of these hidden extras?
August 26, 2011
Mr Redwood,
Might it also be beneficial to establish all the liabilities in the UK economy?
Banks Subsidies:
The Banks pay approximately £26 billion into the UK economy. Great!
Ah! But they receive £130 Billion in subsidies from the UK Tax Payer.
http://www.positivemoney.org.uk/statistics/the-real-contribution-of-banks/
How much is a Billion Pounds ? It’s a Million Million Pounds. (1 million x 1 million)
Based on a population in the UK of 61,113,205 that works out as:
£130,000,000,000,000 divided by 61,113,205 = £2,127,199 each.
Tax payers are now asked – sorry; FORCED to pay the interest on this subsidy that they have provided for the Banks. Are forced to pay back the principal.
The costs of sustaining a Banking System which draws it’s profits from the Hardworking masses of the UK population is the route casue of our debt problems. Banks are making huge profits based on their privelege to create money from nothing and are also provided with Deposit Insurance to allow them to “gamble the farm” on any risky high profit venture they wish for short term profits. Mervyn King has criticised the Banks for their lack of forward thinking and their total disregard for their customers.
Cutting Public Spending is not going to fix the problem. It will make it worse as when people are laid off – they will then seek Housing Benefits and Jobs Seekers Allowances as well as other aid.
Spending millions on Libya – is another black hole of debt for the UK as all future construction and oil profits will go straight into private hands – just like in Iraq and Afghanistan.
But, oh no; Banks Subsidies and Wars do not cost anything? What we are told is that WE have spent too much and must pull our socks up; we are told we need to pay even MORE TAXES, MORE CUTS. While our Financial Principality in the heart of London get fat and happy snorting on the fruits of the Tax Payers hard work.
CUT BANK SUBSIDIES NOW. Listen to Mervyn King. Don’t listen to Gordon Brown.
August 26, 2011
“How much is a Billion Pounds ? It’s a Million Million Pounds. (1 million x 1 million)”
The international usage of a billion is now widely used i.e. a thousand million, whilst a trillion is internationally a million million.
so,
million = 1,000,000
billion = 1,000,000,000
trillion = 1,000,000,000,000
You have accidentally exagerated by a 1000.
August 27, 2011
Thanks caterpillar.
That’s a relief, I thought we were really in trouble for a second there.
So we are only subsidising Banks at the rate of £2,127.20 each?
I wonder what the Banks are doing with this money I keep giving them?
Housing Benefits only cost £20 billion. which is:
20,000,000,000 / 61,113,205 = £327.26 per person.
Total Net Cost of Banks (-26 billion tax revenue):
104,000,000,000 / 61,113,205 = £1701.75 per person.
Summary: The Banks TAKE more than they give.
thanks again Caterpillar.
August 26, 2011
Interesting interview with Greek church by Jeff Randall – warning of “wave of poverty” hitting Greece. I expect the West will be having this feeling of being poorer for some time.
This is because the perception of wealth, that was boyed up by borrowing over the past 10 years, is now being weighed down paying down the debt going forward. The reality of the poverty will only be as real as the reality of the wealth was.
August 26, 2011
Yes this is one way of looking at it.
But sadly those between 0 and 18 and above 65 aren’t going to pay the bills or mortgage.
Those between 18 and 65 who aren’t working aren’t going to pay the bills or mortgage.
Perhaps you could illustrate the effective state mortgage and tax bill average for the working person, 18-65? Then add the cost of their personal mortgage plus student loan plus travel to work?
Heaping more funding onto less people isn’t good. Eventually they will give up or leave. Tell your Cleggy colleagues that please.
August 26, 2011
John, I see you are working on a gross figure for current debts, unfunded public sector pension liabilities, and bank liabilities of 3TN (£50k).
Might that not be low? I have seen figures of 7TN (£113k) estimated.
Whatever, what chance is there, ever, of paying these sums off? We are bust.
Reply: You can make them higher by capitalising more of the future revenue costs of the state,(e.g basic pensions) but then you should also capitalise some of the tax revenues on the other side.
August 27, 2011
Interesting, thanks. That assumes an equivalence between the certainties of demand of the costs, on the one hand, and the ability to collect the revenues, on the other. I would have thought that the former were more inelastic than the latter.
But the practical point still remains. How on earth, on top of normal costs of living, food, housing, transport etc, to which must add the vast amount of personal indebtedness, can the earning citizens of this country, together with the corporations, possibly be able to make any impact on reduction of this debt mountain? This before interest rates have begun to rise, too. The situation will look a whole lot worse then. Surely, the only was will be the dishonest one of inflation, as we experienced in the late 60s and 70s.
August 26, 2011
Hopefully, while we still have a middle class.
August 26, 2011
Don’t worry, their social security system will look after them.
August 26, 2011
We pay a lot of money to the BBC to keep us informed.
In my view it has failed to do this as few people I know are aware of the facts that have been conveyed in this post.
I admit that achieving balance in journalism is not easy. However it should be much easier to report financial matters in a balanced way because for every debit there is a credit.
Thus, if a town that had two libraries makes do with one, then there the bad news that some people may lose their job and some readers are inconvenienced. On the other hand there is the good news that the taxpayer has saved money.
If Gordon brown raises tax in order to fund extra spending on the NHS as he did a few years ago, then, once again, there was a debit to report and a credit to report.
However, on the BBC, the prospect of the potential loss of libraries was treated as a bad news story where only one side of the balance sheet was considered.
On the other hand, the BBC reported the 2002 budget as good news, despite the extra cost in tax. The web page is here http://news.bbc.co.uk/1/hi/uk_politics/1934690.stm
If a politician can lay out our position in simple and clear terms on this web site, then why can’t an organisation which is accepting huge sums of money from us, which has skilled presenters and clever technology at its disposal carry out this service?
The BBC provides some fine programmes but if it cannot inform us properly it isn’t doing its job and I think it is time that an example was made and Helen Boaden was sacked.
August 26, 2011
The third European war is being fought with money.
August 26, 2011
Good to know that an allegedly Conservative led coalition is on course to raise tax to an excruciating level just to keep the public sector party going. I assume the figures don’t take in all the stealth taxes, double taxation, business taxes etc, etc.?
The only difference between Dave and whatever leader Labour would have now if they’d won the election is rhetoric. There really, truly, is no point in voting because the policies are the same.
Reply: Yes the figures are cash figures and include all taxes, as ultimately all taxes are paid by you and me.
August 27, 2011
I pray for a modern day equivalent to the Scot who set Hong Kong on the road to it’s great wealth. The people of this country are addicted to Big Govt just as much as drug addicts are to their poison,George Orwell was right he just got the date wrong,we are an elected dictatorship only the party’s name changes,and all the civil servants and other state employees become fellow travellers and Turkeys that don’t dare vote for Xmas,one day in the future when the history is written every single participant in this huge Ponzi scheme called the state will have a name as black as the ace of spades,and will be as reviled as Hitler/Stalin /Mao etc.
August 27, 2011
The biggest issue in all this is the welfare bill.
Housing benefit, essentially a subsidy to the rentier class (owners of private rental accommodation) has gone off the scale in the last 10 years and now HB alone amounts to more than the UK’s entire higher education budget:
Translation: the state is borrowing money to pay the mortgages of BTL landlords, while we expect our young people to take out a huge mortgage on their future that for most will amount to a 10% graduate tax on top of existing tax bands – for most of their working lives).
Slash HB by half, introduce proper entitlement criteria so that half the third world can’t show up and expect free housing, healthcare and education for their myrriad offspring, cut the free ride for feckless single mothers, and much of the deficit reduction is done (while also sending a strong signal about the kind of behaviour we want to see in this society.
Sadly there is no sign of any of this, instead we get more of the same with a bit of tinkering round the edges.
August 27, 2011
You missed out one important number, the proportion of public spending that is spent on debt interest. It is somewhere north of 10% and is headed for 15%. The public could have the level of public expenditure it wanted if we just got rid of the red ink.
And why, oh why, do you persist in quoting data and forecasts in current prices rather than in constant prices, with the anticipated inflation stripped out? If I add a current pound and a pound five years hence that is worth 25% less than I don’t make any sense, do I?
Zero inflation, zero public sector debt. It’s worth all the pain in the world to get there.
reply: because you and I and everyone else save the government have to budget in cash because cash is what we get paid. We do not get paid in inflation adjusted pounds and cannot spend inflation adjusted pounds. If the state wants to increase its real spending the cash figures show it could do so by controlling its inflaiton rate.
August 28, 2011
I suspect the tax figures do not include the nasty ‘off-balance sheet’ cross-subsidisations that Governments enforce, but doesn’t like them to be seen as tax. For example, the bursaries for ‘less-well-off’ students are non-transparently funded by the Universities. Presumably other Students pay for them. Likewise, the renewable energy ‘tax’ that is on every electricity bill and never stated. Energy companies social tariffs are also funded by other consumers, regardless of their ability to pay.
I suspect the are others, but this practice should be made unlawful. The activities funded this way may be laudable but Citizens should be taxed by Government in a transparent and auditable way not through some underhand slither behind the scenes.
August 28, 2011
It is perfectly clear how government debt can only be brought back to an acceptable multiple of GDP. Stand by for significant long term inflation.
The country has been living beyond its means for far too many years and the population is going to be forced to reduce its living standards – in order to (a) eliminate the deficit; and then (b) reduce the debt we are currently bequeathing to the next generation. What lies ahead is too painful for any politician to make plain to voters. And unfortunately it will inevitably be the CDE’s in the population (as opposed to the AB’s) who will take the majority of the pain, as there are just too few in the AB professional classes to make a difference. So, excruciatingly unpleasant as it will be for those at median incomes and below, these are the people who are going to suffer the most acutely. There is nothing so hard as materially reducing your standard of living, especially if you are not that well off already. But I can’t see any other way of bringing national finances back onto a sustainable basis long term.
Too high a proportion of our working population is less well educated and skilled than huge numbers of people in countries around the world who are prepared to do similar jobs for a fraction of the rewards expected here in the UK and other Western countries. In a world of free trade, unskilled labour is commodity whose price can only in the long run decline to its lowest cost denominator. And the cost burden of well intentioned but (in a global market context) unaffordable employment laws, let alone the overbearing overhead burden of Big Government, exacerbates our relative uncompetitiveness.
Time to tell my grandchildren to reflect carefully whether this country has a future for them. If I was them I would unquestionably up sticks. How depressing and what a shameful legacy we shall be leaving them. Our parents and grandparents, who gave their all in the last century, must be turning in their graves.
So, Mr Redwood, which politicians are going to have the courage to call a spade a spade? Or will it be a case of Turkeys and Christmas?
August 30, 2011
ONLY rampant global inflation will reduce the western world’s state debts.
For all the talk of Cuts the simple truth is that the UK Gov will spend end the year with more debt than it started. We are just treading water until inflation does the job no politician could possibly get elected to do.
2020 – Inflation 15% (& probably interest rates to match).