Earlier this week we saw the May figures for UK spending, tax revenues and borrowing. The figures are complex and have taken me a little while to understand, as there are so many special factors at play.
In April-May this year current public spending is 6.2% higher than in April-May the previous year. The leap was large in April, with current spending at £62.2bn compared to £53.2 bn a year earlier. The explanation given is more rapid payments to local government. I cannot find a figure to compare between years allowing for timing differences in these grant payments. It does mean, however, Councils received a large cash flow injection in April. The benefit bills are rising much less quickly than a year earlier, as this year’s uprating is less than half the previous year’s 5.2% rise.
Receipts are well up, mainly owing to two special factors. The first is the Treasury now receives £3.9bn a month from the Bank of England’s Asset Purchase scheme. The second is the Treasury has taken a credit of £3.2bn for tax receipts likely to be coming from Switzerland following the Swiss tax deal. The credit is for the whole amount they think they might receive over ensuing months.
Underlying tax revenue is mixed. National Insurance is up 3% and VAT up 2.1% in May, whilst Income Tax and CGT are down 2%.
The longer term perspective can sometimes be useful. Total current public spending was £3.6bn in 1946, £10 bn in 1966, £45 bn in 1976 and £138 bn in 1986. In 1996 it reached £283 bn, and £480 bn by 2006. In 2010 it stood at £605bn, to rise to £631bn in 2012. Over many years there has been endless talk about cuts, yet current spending in cash terms and usually in real terms as well has gone on rising.
As the economy picks up it is likely receipts will rise a bit more, helped by the lower rates where these have been applied. Spending should start to come under better control, as the Coalition’s plans always assumed growth in public spending in cash and real terms for the first two years, to be followed by slower cash growth in the second half of the Parliament. This may start to happen, assuming the big boost to Councils is a timing issue and not an overall increase.
Next week the Chancellor will announce spending totals for 2015-16, with a view to putting more downward pressure on the growth in cash spending by the public sector.
June 23, 2013
So many areas that could be cut, so many overpaid staff, so many bloated pensions, so may team building exercises, so many expensive building, so many doing nothing useful, so many actually doing positive harm to the productive and yet the government are still incapable of making any real saving. The state sector is twice the size is should be this it renders the private sector uncompetitive, destroys jobs and kills growth.
They then make it even worse with over regulation everywhere, expensive religious energy, barmy employment laws, excessive planning laws and poorly and (often appallingly) run services like the NHS, HMRC, education, the BBC’s (word left out ed)Harman/Toynbee think agenda.
Labour in 2015 just to kill any residual optimism too.
June 23, 2013
Barmy employment laws that you cannot name and the private sector that you cannot differentiate against the public sector which tell us all we need to know.
June 24, 2013
Nearly all the employment laws are damaging counter productive they get in the way of free contracts and mean the wrong people are in the wrong jobs making industry less efficient and destroying jobs.
June 24, 2013
Then you will be able to name some then, but cannot. what does this again tell us? As soon as you stop hiding you will be squashed as you ideas are right wing fantasy.
June 26, 2013
Just see the employment acts of 2002 and 2008 and read some of the absurd judgements the tribunals make. Huge damage to both companies and workers is the outcome.
June 26, 2013
Maybe you could tell us how an employee on minimum wage and a zero hours contract could further have their rights eroded?
June 26, 2013
This is due to employment laws? Bring a case against a company automatically produces a bad judgement and should be stopped? This would give employees no rights. Is this what you want? We will get to the bottom of your fantasies and then you will be squashed, but no doubt writing the same propaganda and blaming the BBC for it.
June 23, 2013
If there are so many areas that can be cut why are you always unable to name any of them?
Also given the failure of private healthcare in the USA it’s a good thing we have the NHS.
June 24, 2013
And of course there are only two options, NHS or credit card health ….How ridiculous! The NHS is safe, that’s why Hunt has said that he cannot guarantee the standard of care…..
zorro
June 24, 2013
Healthcare in the US has a rather better record than the UK for most treatments but it does tends to encourage over intervention for money generation reasons. There are far better systems we could copy or design. The NHS is a dreadful system of rationing by causing delays and inconvenience.
They cannot even buy simple drugs efficiently, nor fire incompetent staff easily and ration treatments that are needed urgently by delays and pointless intermediate steps.
June 24, 2013
Not for the millions without any insurance or the uninsured facing bankruptcy for being ill or the millions stuck in dead end jobs just because it has a healthcare policy attached. As pointed out to you the £18 a week quoted by HMRC for the average 2k earners looks like good value, not to mention the economic benefit of having a healthy population to work for companies that make no payment towards this healthcare.
June 26, 2013
Where is your reply ligic to this major point?
June 30, 2013
The NHS is often dreadful, with appalling delays for urgently needed treatments, a very poor service at weekends and generally at casualty – how does that provide a healthy workforce, far better systems can be arranged that benefit the patients rather than the staff for a change.
June 23, 2013
For all the talk of cutting deficits a 6% rise is awful.
Given that private sector growth is nothing like this we seem to be moving to a Greek style spending crisis.
June 23, 2013
Cameron, Osborne and big state politicians surely need to be told that taxation is not a government right it is a privilege that tax payers grant our politicians. They should spend it wisely and carefully in the very few areas where governments can actually spend it better than individuals.
They should then abolish the Climate Change Act and save the country circa £20 billion per annum at a stroke.
June 23, 2013
Firstly taxes are mandatory for anyone who wishes to live in the UK. They’re not a privilege.
Secondly given how poorly the private sector often spends money there are many areas where the Government would do better. The 2008 financial crisis just shows how badly some private banks were spending their money.
Thirdly either provide some evidence regarding the cost of the climate change act or admit you just made up this number.
June 23, 2013
Uanime5, you may want to familiarise yourself with the manner in which the government of the day slipped revised costs of the Climate Act 2008 past parliament without even offering a debate.
Indeed, a debate on the costs was called for by Peter Lilley in parliament, as follows:
“Will the Leader of the House tell us when we are finally going to have an opportunity to debate the revised assessment of the costs and benefits of the Climate Change Act 2008, which was slipped out for the Secretary of State for Energy and Climate Change without a statement, as were his responses to my subsequent questions, even though it shows that the costs, at some £400 billion, will be about twice as high as we were told they would be when the measure was debated? That means that it will cost every household in the country about £20,000. Simultaneously, the Secretary of State admitted that his predecessor had overlooked nearly £1 trillion of benefits. Those are the largest financial errors ever made by a Minister. When will we have the opportunity to debate them? They cast doubt on the whole climate change alarmism thesis. Every time the theory contradicts the facts and the figures, they simply change the figures. …I am asking for a debate.”
I think you will appreciate that the costs indicated are not far off 20 billion a year. The benefits, however, are like fairy dust.
June 24, 2013
Taxing the people is a privilege granted to the government by voters to enable it to do certain things for the benefit of the voters. Mainly the rather few things they can actually do better than individuals can defence and law and order. It is mandatory on the people, but a privilege granted to the government, that they should not abuse, as they have hugely.
June 24, 2013
Healthcare, transport, education, political stability are a few more. Allowing companies to use this infrastructure to generate money as there is no danger they will ever pay for any of it themselves and at the moment many do not pay for any of it despite making great use and profits from it. Thats some privilege granted by the government to a small number of wealthy individuals who are still bleating they are over taxed and not incentivised enough. Is six quid an hour minimum wage a good incentive or do you think desperation would be better?
June 23, 2013
Two things:
1. Thank you very much for your hard work in deciphering the figures which, I have no doubt, were very hard indeed to follow. It is so good to have someone like yourself who actually goes where nobody else seems to be going and to investigate better than most journalists.
2. Actually these figures are disastrous. It is good that some of the most outrageous expenditure is being reduced. In a way it is good that the tax take-up is slightly improved. But this is a long, long way from the proud boasts of the Coalition when it won the last election and promised to reform the financial mess left by the very profligate Labour government.
June 25, 2013
Yes indeed Mike. The Coalition had two good years then threw in the towel. Automatic stabilisers indeed. Bah! Humbug!
June 23, 2013
“Receipts are well up, mainly owing to two special factors. The first is the Treasury now receives £3.9bn a month from the Bank of England’s Asset Purchase scheme.”
That could been seen as a nice little earner for the Treasury, if it weren’t for two facts:
1. The money the Treasury is getting from the Bank has come from the Treasury in the first place and is just being recycled.
Of course there would be no problem with having “Payments to the Bank of England in respect of its holdings of gilts” down as a detail of government spending, and “Payments of surplus cash from the Bank of England Asset Purchase Facility” down as a detail of government receipts, provided that the first was never forgotten when the second was mentioned.
2. Eventually that flow of money from the Bank to the Treasury will have to cease and instead the Treasury will have to start compensating the Bank for the substantial losses it will incur on its stock of gilts, nearly half of which were purchased at very high prices and very low yields from late 2011 through to late 2012.
Maybe one day we will have a national fund providing the Treasury with a dependable income which has not originated from payments made by the Treasury itself, a fund which did not hold gilts but instead held other assets such as private company shares and bonds, and bonds issued by foreign governments.
June 23, 2013
That ‘one day’ is, I am afraid, a distant dream…….The QE experiment’s main practical purpose has been to get the government out of the gigantic hole of funding its budget deficit…..hence my longstanding prediction that it will be north of £500bn by 2015…..and it will definitely be so now. Just wait until Mr Carney lets rip!
zorro
June 23, 2013
“Total current public spending was £3.6bn in 1946, £10 bn in 1966, £45 bn in 1976 and £138 bn in 1986. In 1996 it reached £283 bn, and £480 bn by 2006. In 2010 it stood at £605bn, to rise to £631bn in 2012.”
Just taking the first and last numbers that works out as an increase by a factor of 175, which would be an average compound rate of increase of about 8% pa.
Most of that 8% pa will be down to inflation, which for quite long periods was averaging about 7% pa before it was driven down to run at lower levels; maybe 2.5% pa could be taken as representing the real growth of the economy, at least making higher levels of public spending more affordable, whether or not they were desirable; a relatively small part, only about 0.4% pa, could be attributed to the expansion of the state from spending about 35% of GDP to more like 45% of GDP.
If since 1946 inflation had averaged 2% pa, and if the state’s share of the economy had remained at about 35% of GDP, then with real GDP growth averaging 2.5% pa the 1946 spending number of £3.6bn would have increased to about £68bn in 2012.
June 23, 2013
Indeed but even 35% of GDP is far too high, especially given the appalling quality of many of the “public services” actually delivered. Also it is not merely the circa 50% of GDP they actually spend (more usually waste) it is the huge inconvenience and extra work they create for the private sector. This with absurd regulations everywhere, over complex tax laws, endlessly moving goal posts, licencing, planning, employment nonsense, distortion of markets (particularly in over expensive energy, banking, augmenting the feckless and in housing), the absurd anti business BBC agenda. These impose a further huge pointless overhead on the productive. Rendering many of them uncompetitive in world markets, killing them or simply pushing the jobs abroad.
Is this what they want?
June 23, 2013
Denis–What might be interesting would be to see a graph of public spending, or perhaps the increase thereof, by each individual year since 1946 with the graph painted Red or (used-to-be True) Blue as appropriate. I rather assume such a graph would be a lot closer to flat in the Blue bits. I hold no brief for the Conservatives these days as you might have noticed but if possible I despise the Labour Party even more and it is one of life’s mysteries why the Conservatives do not make more of facts such as this instead of their other incomprehensible agenda. What could the likes of Balls say in the face of such a graph?
June 24, 2013
If JR will publish the link, there are charts here:
http://www.ukpublicspending.co.uk/spending_brief.php
but you would have to do your own retinting as they’re all in blue.
As a % of GDP, which measures how affordable the spending was, the two world wars obviously appear as huge peaks, then
“After World War II, public spending consumed about 35 percent of GDP, and this level continued through the 1950s. At about 1960 expenditures began a steady rise that peaked in the early 1980s at 45 percent of GDP.
During the 1980s public spending was cut as a percent of GDP from about 45 percent down to 35 percent in 1989. But then, with the ERM sterling crisis and associated recession, it rose back to 40 percent of GDP before declining to 36 percent in 2000.
After 2000 public spending increased rapidly, with a peak of 47 percent of GDP expected in 2011 in the afermath of the financial crisis of 2008.”
It’s actually quite hard to say which party was the most to blame.
June 24, 2013
http://www.ukpublicspending.co.uk/spending_brief.php
There you go old chap……
zorro
June 24, 2013
Young Zorro–You missed out the Red and Blue but thanks anyway
June 25, 2013
Indeed Public spending in the UK has steadily increased from 12 percent of GDP in 1900 to nearly 50% today. Worse still much of it is used to do nothing or even to inconvenience and divert the productive from being productive.
June 26, 2013
A 1900’s lifestyle for the population would not be excepted. No NHS, no jobs, no housing and no money. The 19oo’s cannot exist any more than the 1500’s and peasantry can. Is that ‘sensible’?
June 23, 2013
That is what inflation does to a country…..destroys it
zorro
June 24, 2013
Inflation is a cheat; but on balance most people would prefer to be cheated a bit by inflation rather than be unemployed and destitute.
June 24, 2013
If it’s a bit….OK……but not an easy tiger to tame.
zorro
June 24, 2013
Where is your evidence that zero inflation would lead to more unemployment and destitution than a little bit of inflation. Granted, there would be a short term effect but it wouldn’t last. Monetary demand isn’t real demand.
June 24, 2013
A zero inflation target would be very dangerous, it would be far easy to tip into deflation.
June 23, 2013
I am not surprised that the figures have taken you a little while to understand; obfuscation is the one thing at which the government excels. Much is being made of the need for Osborne to find another £12bn of ‘cuts’ against a background where he is still spending £120bn more than he receives in revenue each year. Before the election this man promised to eliminate the structural budget deficit by 2015 and begin to reduce the government debt. A pledge that he jettisoned very soon after taking office. The net debt figure when Osborne took over was £759.5 bn. In his first budget Osborne planned to increase it to £1350bn by tax year ending 2014-15. The latest OBR figures, in this year’s budget, show a projection of £1398bn for that year increasing to £1637bn in the year 2017-18. Is this supposed to represent success? I don’t think so!
June 23, 2013
I suppose that being generous to the Coalition, you might say that they had stemmed the increase in the budget deficit, but even so, this has only increased the debt and the interest paid on it, notwithstanding expanding the monetary base by £375bn so far via QE……Looking at things objectively, it is difficult to see how the Coalition has been successful in its objectives.
zorro
June 23, 2013
The focus really has to be on spending.
Higher “receipts” are misleading. How much of that Swiss £3.2bn will be claimed back under double-taxation rules, where it has been deducted erroneously? The investment returns on the assets purchased with printed money is, well, funny money squared. All of these “receipts” make working people poorer, and that can’t be counted as good, can it?
Additionally, higher spending also makes working people in the private sector poorer. So we still have a “double whammy” on working people in the private sector.
June 23, 2013
I read in the Sunday Times the green deal has managed to make two loans of the 10,000 target. “Green Deal flops as only two get eco-loan”. Scrap this expensive pointless nonsense for starters. I assume the staff enjoy the usual nice offices and team building junkets though. Doubtless with lots of PR staff.
June 23, 2013
My word, what a success! But this is the type of nonsense which the Coalition has espoused which will make their re-election even less likely…
zorro
June 23, 2013
‘Government’ is all about jobs for government employees – nothing else.
The ‘Green Deal’ is therefore a success.
June 23, 2013
What a shame house prices are ‘advancing’ so that people will spend even more of their income on housing.
June 23, 2013
Indeed increase the supply of houses by cutting all the parasitic government costs that push up building costs and restricts the supply of building plots.
June 23, 2013
In other similarly welcome news, the cost of food is “advancing”, and the electricity bills are “advancing”, and rail fares are “advancing” …
June 24, 2013
Labour would say that they are ‘progressing’….if they were in power.
zorro
June 23, 2013
What a shame that this Government is no better than the last, as far as Government spending goes.
June 23, 2013
The truth is no progress has been made since the coalition took over . For all the talk about the need to bring expenditure under control and reduce the deficit , the Treasury and the Government have not managed to achieve the promises made . In such a situation the only recourse is to change the management , starting at the top . Politicians should not be allowed to hide behind a blanket of fudge ; they should face the consequences of their failure and either resign or be sacked . Osborne has just done this to RBS , so , why should he be treated differently ?
June 23, 2013
Interesting story of how immigration restrictions are putting off wealthy tourists and helping France. Attracting the wealthy here and stopping immigration is a fundamental belief source for many right wing fantasists, so square that one off.
http://www.guardian.co.uk/world/2013/jun/23/paris-lures-chinese-tourists
June 24, 2013
The numbers of Chinese visitors coming to the UK are increasing nicely. Come to Windsor and see……
zorro
June 23, 2013
If we are to believe what we hear and read from the media the subject of squandering taxpayers money by government, local authorities and the BBC has become a major scandal. But is anything being done about this?
(raises the issue of Mr Lansley’s response to the health cover up – I wish to hear Mr Lanlsey’s account before posting on this topic-ed)
June 23, 2013
Apparently David Cameron (and his cabinet) now thinks that pensioners should be asked to contribute to more of the coalition’s deficit reduction plans, “having so far escaped the worst of the austerity measures”.
What he so obviously fails to take into account then is that anyone forced to take out an annuity in the near future is going to be stuck with an historically low interest rate investment for the rest of their lives.
June 23, 2013
Brits only ever start to feel financially confident when house prices are rising and the media is constantly telling them so. Alas, commercial property is struggling. Four Pubs in my area are now closing with planning permission for A1 shopping from A4 drinking, with flats above. All carefully camouflaged so as not to give away the shopping tenant; probably a Tesco Express or similar for that size of the floor area. The beauty of these older pub conversions is they all come with there own car parks; it’s the future you know.
Anyway JR, don’t go fretting about government spending. By nature, the private sector is trying to push up some green shoots; things are frankly desperate on the SME industrial estates of England. Knocking out more fiscal stimulus (government spending); plus, APF Gilts interest payments no longer going into the private sector (effectively an increase in taxation); austerity is acting as a very good weed killer of those green shoots.
See you at the end of the flatline in 2020.
June 23, 2013
Off-topic, the FT’s eurofanatic Wolfgang Munchau has just come out with a pessimistic analysis of the total money required to recapitalise banks in the eurozone.
http://www.ft.com/cms/s/0/f4577204-d9ca-11e2-98fa-00144feab7de.html#axzz2X3eHuZgb
Maybe €2.6 trillion, or maybe only €1 trillion, but in either case very much more than the €60 billion that the eurozone governments are prepared to make available through the ESM for that purpose, and probably much more than they would be prepared to make available in any other way.
June 23, 2013
I am just trying to get my head around yours and others comments. I am afraid if you all don’t quite understand , then I havn’t any chance. How do you all expect the public to understand/ I am trying , but most don’t and just accept what they are told.
June 23, 2013
It would be interesting to see some expenditure analysis showing how much of departmental expenditure is wages ( broken down by seniority and average remuneration levels) then how much spending is on running the department (lights rent etc) and how much is spent on initiatives with impact reports for each of those initiatives.
This might give us an idea of the value the taxpayer gets from government spending our taxes. It may also make it easier to view where the 18.7 reduction in spending required to balance the budget might come from.
I can not see the benefit bill reducing greatly without reducing pension payments, education, health and overseas aid are ring fenced, we must have some form of defence and good policing so reductions can really only come from other overly large government departments. Of course by the time you have accounted for ring fenced and imperative expenditure there is probably a requirement to pare over 50% of what is left in order to break even.
June 23, 2013
“downward pressure on the growth in cash spending by the public sector”
Not good enough. Rather than merely slowing the increase, spending needs to fall in real terms, by real amounts. Like 20%.
June 23, 2013
“with a view to putting more downward pressure on the growth in cash spending by the public sector”
According to the figures he has yet to put even a sparrows breath of downward pressure on spending. This government is no more going to make real cuts in public spending than I’m to be the next Pope. To imagine that they will have a sudden epiphany and come to their senses is at best a fantasy.This current state of affairs will continue until it cannot.Then we’ll see some cuts, real big ones.
June 24, 2013
All Government is corrupt. We see (questionable behaviour-ed) in politics, the NHS, the police, the secret service, doctors pay and working hours, the BBC, tax advisors in the HRMC, global corporates, the immigration service.
Government is inherently wasteful.
The only people who play fair are the vast majority of honest British people.
The LibLabCon political system has utterly failed.
We need a new political party based on transparency and low wages. If the Conservatives can’t see why the Government is overspending and failing at the same time then they don’t deserve to be in power.
Nobody should earn more than the PM. No country should let elderly parents or those on low paying immigrants into their country when unemployment is so high. It’s the road to ruin. It’s madness to believe otherwise.
June 24, 2013
Javelin: “All Government is corrupt. ”
Qualification: All big government is corrupt.
Largely because no one actually knows what anyone is up to. There is far too much scope for private Empire building – and too little accountability. A lethal combination that leads to corruption and graft.
June 24, 2013
What a confession of failure to do duty, by governments of all colours. The fact that current public expenditure has risen from £3.6 billion in 1946 to £631 billion in 2012 is an indicator of how much inflation has debauched the currency. I refuse to use the neutral word ‘debased’, such has been the scale of the sheer irresponsibility by the body politic as a whole in this matter. No attempt has been made by John Redwood – or most other professional politicians and economists – to correct the numbers for inflation and to express them as a % of GDP. Heaven forbid, that might be informative – and that would never do.
Nor is there any discussion of the elephant in the room. The amount of public money being spent on the retired elderly, through NHS health care, State pensions and social services, is catastrophic already. When you consider that the number of over 65s will increase by a third by 2030, and that few politicians dare to discuss cut backs, the scale of the problem becomes apparent. So here’s a few practical suggestions:
– Raise the retirement age for men by one year in every 5 year parliament until it reaches 70.
– Get rid of all concessionary transport fares.
– Get rid of silly pensioner benefits like the £10 Xmas bones and cheap television licenses.
– Make all other pensioner benefits taxable.
– Eliminate State contributions to care homes except for paupers.
– Get the medical profession under control. It is ridiculous to spend billions on powerful drugs to prolong old age (plus the bill for drugs to correct side effects), only to see the old people live long enough to suffer from Alzheimer’s disease. What’s the point?
People of my generation (I have just turned 67 and am one of the ‘baby boomers’), especially the intellectually gifted ones, have had it made in terms of benefiting from political decisions over the decades. We have had a very good innings and it’s time to put the younger generation first. Just give us zero inflation and liberation from out Stalinist health and social care services, and you can take away all of the other perks.
Reply The government publishes real terms figures as well. I have to hand 1971-2009: In 1970-1 current public spending was £195 BN IN 08-9 prices. By 08-9 it was £564 Bn in 08-9 prices. As a percentage of GDP it had risen from 32.7% to 39.4%. This time period includes Labour’s IMF cuts, the “Thatcher cuts”, and the post ERM “cuts”, resulting in a near trebling of spending in real terms.