No shortage of UK public borrowing

 

           The May figures for public borrowing have risen from  £15.2 billion in May 2011 to £17.9 bn for May  2012.

            Spending is well up, rising by 7.9%. Income tax  and capital gains tax  revenue has fallen by 7.2% on the same month last year, underlining fears expressed on this site that the government has not set revenue maximising rates. The higher rates are yielding less revenue.

             The government says there might be one off items distorting these figures. However, the falling receipts from Income Tax is now a well established trend which should be worrying the Treasury. The spending figures confirm the arguments here that so far public spending  under this government has been rising in real terms overall, despite some specific cuts.

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28 Comments

  1. Lord Blagger
    Posted June 26, 2012 at 1:43 pm | Permalink

    1. Borrowing. Ignores the increase in the other debts that are hidden. The 5.5 trillion of pension debts. Since that’s linked to inflation, the increase over the last year was 154 billion based of the latest inflation rate. [1]

    So combine deficit and the other increases that well over 300 bn a year at the current rate.

    Lets be honest, government has no intention of paying out its pension debts, because it can’t tax enough in order to do so. The consequences are defaulting.

    You see it going on now. Forget the “something for nothing” malarky. It’s the opposite. e.g We want all the tax, but you get nothing in return. That’s the real message. Stand still whilst you are milked of your cash.

    [1] CPI not Rossi index for the increase, so an underestimate for lots of the increase

  2. John Hann
    Posted June 26, 2012 at 2:12 pm | Permalink

    Not only has the state been spending too much, but it has neglected its sources of income. By allowing manufacturing to decline it cannot now raise enough tax to restrict the budget deficit, or export enough to limit the current account deficit.

    The UK used to make mainly high-tech products like aircraft, machine tools, electrical equipment and locomotives. These industries did not go to the new economies, but rather to higher-cost countries like Germany, Japan, France and the USA.

  3. scottspeig
    Posted June 26, 2012 at 2:16 pm | Permalink

    Not that I want this to be the case, but could the falling tax take just be a consequence of a stagnant growth as opposed to the tax rate – we keep hearing of these high fliers now getting no bonuses (which presumably were taxed at 45%+) Perhaps that is the cause?

    Either way, the govt needs to cut and cut fast – alas, I don’t think it will happen and so I think defaulting may have to be an option at some point.

  4. MajorFrustration
    Posted June 26, 2012 at 2:27 pm | Permalink

    and no uplift in Private Sector borrowing. So much for the Government’s efforts to increase growth. The clock towards 2015 in ticking down.

    • Tad Davison
      Posted June 27, 2012 at 7:47 am | Permalink

      Well the means for Cameron’s, and the nation’s deliverance is in his own hands. If he wants to sleepwalk over the EU precipice, and thereby make the Tories totally unelectable, that’s up to him. Just as long as he doesn’t take us with him, and gives in to the Barroso model of an integrated Europe.

      But that’s what’s coming! Cameron isn’t doing the business!

      Tad

  5. oldtimer
    Posted June 26, 2012 at 2:54 pm | Permalink

    And to think that the other day we were being told that we were getting the deficit and the debt down! The problem was solved! The job was done! If only.

    • Tad Davison
      Posted June 27, 2012 at 7:52 am | Permalink

      Now you can see why I am so fed up with Toady politicians!

      They really are so detached from reallity. I used to be respectful to MPs when I used to go to Westminster, now, I’ve got so much hatred and contempt for them, I’d want to pull them across the table!

      This is our country they’re ruining with their ineptitude!

      Tad

  6. Lindsay McDougall
    Posted June 26, 2012 at 3:31 pm | Permalink

    The government has reduced income tax for people on low and middle incomes – those who either cannot or do not leave the country. At the same time it has lowered the 40% tax threshold (£10,000 lower than in 1992 after adjusting for inflation) and retained a 45% top tax rate. The people subject to these higher rates can and do leave the country.

    In short, if it wanted to reduce the receipts from income tax, the government couldn’t have tried harder.

    I had some earnings from overseas work last year. I have not yet received an income tax form. There is one reliable feature of the public sector. You can always rely on their sloth.

    • Lindsay McDougall
      Posted June 28, 2012 at 11:54 pm | Permalink

      There is another factor that is reducing the income tax take: people are taxed as individuals but most do their financial planning as couples. So if a couple has a joint earning capacity of say £30,000 pa, it pays to split the work and income equally so that each partner pays a low amount of tax, as opposed to one partner earning all of it and the other staying at home. Such choices must be a factor in reducing income tax.

      Also, this recession is different. In the recessions of the 80s and 90s, unemployment peaked at about 3,000,000. In this recession 2,500,000 might be the peak but there is more part time employment.

  7. Antisthenes
    Posted June 26, 2012 at 3:33 pm | Permalink

    What does it take for treasury officials, politicians and bureaucrats everywhere to understand that the basic law of economics states that expenditure and rainy day savings must equal income. Printing money, devaluation and inflation are not cures but symptoms that the equation is badly out of sync. When these symptoms appear the first job has to be to identify the cause and in the cases of the UK and Europe that is very easy to do. Expenditure has risen and earnings have fallen because of mismanagement, vested interest favouritism, political corruption, ideological social engineering and centralisation of economic processes. Address those causes and stop tinkering with the symptoms and the problems will be solved. The cure will be painful but it is more likely that there will be a full recover than what is being done now.

    • Tad Davison
      Posted June 27, 2012 at 8:02 am | Permalink

      Amen to that!

      Tad

  8. Richard
    Posted June 26, 2012 at 4:26 pm | Permalink

    These figures show that both sides of the Government’s profit and loss account is in trouble. Income is down 7% and expenditure is up 7% which is a big swing.

    Any business faced with these figures alarm bells would be ringing and Directors would be calling urgent meetings with department heads.
    In my experience the outcome would be that any purchases not deemed vital would be stopped, all recruitment would be stopped and most major projects would be put on hold.
    There would be a requirement to develop new budgets for each area of the business with lower levels of spending and a cost cutting efficiency drive would be started.
    But most importantly here would be a big sales drive and prices would probably be reduced to stimulate sales.
    These actions would usually reverse the downward trend towards disaster in Companies I have been involved in, but it is the current lack of decisive action and the apparent complacency in Government that amazes me.
    But then in our Company we couldn’t print our own money and any money we borrowed was backed up by personal guarantees which tended to concentrate our minds somewhat.

  9. Brian Tomkinson
    Posted June 26, 2012 at 5:01 pm | Permalink

    Now do you still wonder why so many of us think this government has wasted 2 years and why we think they are nn better than Labour?

  10. Posted June 26, 2012 at 5:06 pm | Permalink

    Stamp duty up to an absurd 7% is just stopping people moving at all. The decline in income tax is hardly surprising given the anti growth anti business policies they continue to push every day. The clearly anti growth business secretary also remains in position like a warning off flag to any business – so the tax revenue decline will continue too I assume.

  11. Boudicca
    Posted June 26, 2012 at 5:23 pm | Permalink

    Osborne is running a ‘Continuity Brown’ Treasury and Cameron is running a ‘Continuity Blair#’ Government.

    It makes no difference whether it’s Lib Lab or CON occupying the government benches in Westminster. Their policies are virtually identical and the EU effectively governs us.

    I will be exercising a choice at the next GE – by voting UKIP.

  12. Tad Davison
    Posted June 26, 2012 at 5:51 pm | Permalink

    Saturation, saturation, saturation!

    Not something we traditionally associate with traditional Conservatives!

    That begs the highly emotive, but still very pertinent questions, where did the divergence occur? And, is there any chance we might yet get back to tradititional Tory values and good governance?

    Heath-ites rule! But it’s self-evidently far from OK!

    Tad Davison

    Cambridge

  13. zorro
    Posted June 26, 2012 at 5:52 pm | Permalink

    Ouch! Time to fire up the printing presses says Mervyn King…..http://www.bbc.co.uk/news/business-18587254…….That’ll sort it out….er……

    zorro

  14. uanime5
    Posted June 26, 2012 at 6:52 pm | Permalink

    Well if the Government has to borrow more to make up the loss of Income Tax this would explain why borrowing is rising while Income Tax is falling.

    If the Government is going to try to raise more money through tax cuts they should start with tax cuts for the poorest, rather than the wealthiest.

  15. Jon
    Posted June 26, 2012 at 6:58 pm | Permalink

    If I wasn’t taxed so much on cigarettes think of all the things I could be spending that money on. Instead I’m stuck paying off the deficit leaving non smokers like Mr Carr to spend it on accountants and advisers. I understand that they now plan to sue those advisers if they end up having to pay tax, they aren’t so sorry after all.

  16. Martyn
    Posted June 26, 2012 at 10:24 pm | Permalink

    Well, perhaps the cash-cow public are becoming more cautious, spending less, worrying more about their income and expenditure? And thinking, why the Hell should we keep on paying out so much of our income to keep so many useless jobsworths in employment whose sole aim is first to expand their empire, secondly to show us that they are the masters and thirdly to undermine our national heritage?

  17. alan jutson
    Posted June 27, 2012 at 7:52 am | Permalink

    John

    They cannot say you did not tell them so.

    Once again you could forsee the problems ahead when others were blind.

  18. Tony
    Posted June 27, 2012 at 8:12 am | Permalink

    I believe there are some one-off effects.

    The transfer of the Royal Mail Pension brings assets of 28bn, which reduces net borrowing. Thank goodness they don’t have to include the estimated 35bn of future liabilities or it would have increased!

    I have to wonder what the government accounts would look like if they included all assets and all liabilities…

  19. Steven Whitfield
    Posted June 27, 2012 at 1:15 pm | Permalink

    Older, wiser heads knew that you should always ‘cut your suit according to your cloth’. Times are tough so the country needs to reign in spending. Even if times were good we have a host of evidence that much spending was being wasted and even causing harm. To carry on now with the spending binge is unforgivable.

    So divorced is the treasury and our adolescent chancellor from common sense that they are ploughing on spending money they don’t have.
    What makes Mr Osborne think he has the knowledge and experience to make the big decisions. ?
    He got the job because he was David Cameron’s friend and he is good at deflecting awkward questions and he is in the clique. This would all be fine if Mr Osborne was a supermarket manager but millions depend on him making the right judgements.

    Why is it that we can be intelligent enough to design a F1 car gearbox in this country but we can’t make some basic common sense decisions on runnign the economy – the answer is that an arrogant and pushy elite have grabbed the levers of power who know nothing about running a succesful economy. This group are good at running up the ladder of power and then kicking it away from more able colleagues such as John Redwood.

    Why can’t John Redwood be appointed as a special advisor to the treasury – it’s not like he could make the situation any worse and may do a great deal of good.

  20. Steven Whitfield
    Posted June 27, 2012 at 1:16 pm | Permalink

    Older, wiser heads knew that you should always ‘cut your suit according to your cloth’. Times are tough so the country needs to reign in spending. Even if times were good we have a host of evidence that much spending was being wasted and even causing harm. To carry on now with the spending binge is unforgivable. .

    So divorced is the treasury and our adolescent chancellor from common sense that they are ploughing on spending money they don’t have.
    What makes Mr Osborne think he has the knowledge and experience to make the big decisions. ?
    He got the job because he was David Cameron’s friend and he is good at deflecting awkward questions and he is in the clique. This would all be fine if Mr Osborne was a supermarket manager but millions depend on him making the right judgements.

    Why is it that we can be intelligent enough to design a F1 car gearbox in this country but we can’t make some basic common sense decisions on runnign the economy – the answer is that an arrogant and pushy elite have grabbed the levers of power who know nothing about running a succesful economy. This group are good at running up the ladder of power and then kicking it away from more able colleagues such as John Redwood.

    Why can’t John Redwood be appointed as a special advisor to the treasury – it’s not like he could make the situation any worse and may do a great deal of good.

  21. Jon
    Posted June 27, 2012 at 7:23 pm | Permalink

    There is no shortage of borrowing which equally means there is no shortage of those who wish to buy/lend and to Euroland, why?

    The positive outlook of the bond buyers is down to the long term, they see the populous emerging markets creating demand for quality European products. If you listen to many in the EU they want us to be more like China etc and to produce cheap products because in their little minds they think thats competing. If any idiot did take their advice the bond buyers would dissapear and that really would be a mess.

  22. Conrad Jones (Cheam)
    Posted June 28, 2012 at 8:45 pm | Permalink

    I’m no Economist but let me apply some logic here.

    Given our debt based monetary system, if Public Borrowing is up then it is probably becasue “Income tax and capital gains tax revenue has fallen by 7.2% on the same month last year,”.

    A new Report written by PositiveMoney gives an Example of one Private Firms account.

    “So is the banking sector really bankrolling the rest
    of the UK? How much tax are banks actually paying?
    Recent evidence on an individual bank’s tax expenditures
    suggests that it may not be that much. For
    example, ******** paid just £113m in UK corporation
    tax in 2009, yet earned £11.6bn in profits during the
    same period.1 This translates as a tax rate of just
    1%, even though the corporation tax rate in 2009
    was 28%. ******** would of course point out that it
    earned a large proportion of its profits overseas and
    so would not be eligible to pay the full 28%. Cynics
    might question the purpose of the 300+ subsidiary
    companies which ******** has operating in tax
    havens throughout the world”

    Many high street names operate in a similar way to this Bank, PositiveMoney’s focus on Banks is because they are heavily subsidised and have a license to print and control the money supply.

    The point I am making here is that Large Private Firms have found and expanded ways of escaping payment of Taxes. Much of these Taxes are required to pay the Interest on the National Debt, due to the Issuance of Treasury Bonds. We pay high Income Taxes and VAT of 20%. How long before VAT is 25%, or 50%? I remember when VAT was 7.5%. It appears once we get use to paying a certain level, the rate goes up again.

    Guernsey does not obtain money for public spending in the same way, they just issue Currency and spend that directly into the Economy – usually on Public works. Guernsey has a low Income Tax and NO VAT.

    If you want to reduce Public Borrowing – in our economy which uses 97% debt backed Commercial Bank Money; then you have to stop Tax Avoidance by the Large Multi-Nationals – unless you want a form of Corporate Communism. If you want to reduce the amount of money the Elderly require then stop the Banks from stealing their savings through negative Interest Rates and encourage people to save rather than borrow. If you want true Capitalism – not Zombie Bank Corporatism, we all need Positive Money.

  23. Conrad Jones (Cheam)
    Posted June 28, 2012 at 8:57 pm | Permalink

    Another interesting point from the PositiveMoney Report “Banking vs Democracy”:

    “It is worth noting that banks, unlike other industries,
    are exempt from paying VAT—an exemption that
    the Institute for Fiscal Studies has said is neither
    necessary nor logical”

    There is a whole array of facts, figures and quotes.
    So Banks didn’t mind too much when VAT went up to help clear up the mess that the Banking System created.

    Note – I am criticising the Banking System – not individuals who work in the Banks.

    So… was David Cameron misleading us when he said “We are all in this TOGETHER” ?

    • Conrad Jones (Cheam)
      Posted June 28, 2012 at 8:58 pm | Permalink

      Or did Mr Cameron – referring to Banks and Government say “We are all in bed TOGETHER”?

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
    Published and promoted by Thomas Puddy for John Redwood, both of 30 Rose Street Wokingham RG40 1XU
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