Falling UK deficit – an update

 

        The September figures for Uk spending and tax revenues showed strong growth in tax revenue more than offsetting the 2.5% increase in cash current public spending (compared to last year). Income tax revenues have been well up so far this year, following the cut in  the higher rate, despite the increase in the tax threshold taking more people out of paying any income tax. Extra public borrowing  fell by £1bn this September compared to last.

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29 Comments

  1. lifelogic
    Posted October 22, 2013 at 5:38 pm | Permalink

    So when is the absurd 45% rate going.

    I see John Major is now calling for a windfall tax on energy companies. Is there no end to this man’s stupidity? Cameron described it as “interesting”, would not totally moronic not have been rather better.

    • Dan H.
      Posted October 23, 2013 at 9:46 am | Permalink

      You know, I always used to think that Major was quite a nice chap, fairly sensible if somewhat uninteresting (had his affair with Edwina Currie become public knowledge, it might even have done him some good). However, advocating windfall taxes is absolutely barking mad.

      The energy companies are playing by the rules of commerce in Britain. They are breaking no laws. They are putting up prices because their costs have gone up, and because of the various insane “green” taxes the Government is forcing them to hide in their bills; they are not suddenly all getting greedy by the same percentage all at once (slight differences being down to differences in the gas futures each owns, and the company economics).

      So, slapping all of them with a honking great punishment tax is frankly asking most of these companies to start asking themselves why they are even bothering to operate in Britain at all. Going from the current position of healthy, regulated competition to a cramped marketplace of just a very few suppliers as asking, nay screaming out a request for the few remaining companies to form an unofficial cartel. We know where that one ends; we end up with a government monopoly on gas supply, and those of us who remember the 1970s know just how abysmally terrible government monopoly suppliers are.

      Can someone please shut this (man ed) up?

      • Denis Cooper
        Posted October 23, 2013 at 11:31 am | Permalink

        I believe that Kim Philby was also quite a nice chap; often it is the traitors who come across a quite nice chaps who are the most dangerous.

        • APL
          Posted October 25, 2013 at 4:37 pm | Permalink

          Denis Cooper: “often it is the traitors who come across a quite nice chaps who are the most dangerous.

          Didn’t much care for Edward Heath.

      • uanime5
        Posted October 23, 2013 at 12:54 pm | Permalink

        The wholesale price of gas has fallen since 2008, yet energy cost have continually increased the price they charge. So what costs are causing the energy companies to increase their bills by an above inflation amount? It can’t be due to “green taxes” as these haven’t increased.

        Given the lack of competition in the energy market it effectively is a cartel.

        Also if the energy companies leave then we can simply renationalise their assets and create a British owned power company similar to EDF.

      • Tad Davison
        Posted October 23, 2013 at 3:11 pm | Permalink

        Major was the best Prime Minister the Labour party never had. He made the Tories increasingly unpopular and gave Labour 3 election victories on the bounce, and thereby the chance to carry on the pro-EU work when his own party, after catching on to the dangers of the EU, began to turn increasingly Eurosceptic.

        There was never anything I liked about that bloke – ever! I’m sure he thinks of me as one of the ‘bastards’, but I bet I could beat him hands-down when it comes to name-calling. Pity more of us don’t get that chance face-to-face. We could only make our feelings known by putting a cross in a different place on the ballot paper.

        I think of Major every time I recall Norman Tebbit’s speech to the House of Lords after Margaret Thatcher’s death, and how the noble lord wishes he could have saved her from her ‘friends’. Major’s damage is incalculable in its volume, but it would seem he isn’t yet finished, and keeps on putting a spanner in the works, all the time with one eye on the EU prize. Trying as he does, to assure us that EU federalism is dead, when anyone who takes an interest in these things knows that is far from the truth.

        At today’s PMQs, David Cameron denounced Miliband as a con-man. He might have a point, but he needs to acknowledge the betrayal of members of his own party first, for without that, there wouldn’t be the present difficulties. Until the Conservative party is totally free from the influence of Heath-ites like Major, they cannot hope to command the support and respect of the voting public, and thereby form a proper government that acknowledges the antithesis towards the EU and the damage our membership has brought with it.

        Tad Davison

        Cambridge

      • Bazman
        Posted October 24, 2013 at 5:12 pm | Permalink

        Healthy regulated competition? What competition they operate in a cartel like way. Why do they bother to operate here? Our often foreign-owned energy companies make four to five times as much profit in the UK than they are allowed to make in their properly regulated home markets and Ofgem has estimated that energy companies will triple their profits this year but does nothing to protect consumers from predatory pricing. You obviously do not struggle with bills allowing yourself to live in an apologist dream world.

    • behindthefrogs
      Posted October 23, 2013 at 11:52 am | Permalink

      Rather than looking for lower income tax rates we should be looking at reducing NI contributions by raising the thresholds.

  2. Richard1
    Posted October 22, 2013 at 6:31 pm | Permalink

    Yet more evidence for the findings of the Laffer curve. Cut the rates and up go tax receipts. That’s why countries like Switzerland, which have low tax/GDP and low tax rates, can afford excellent public services and generous benefits.

    • uanime5
      Posted October 23, 2013 at 12:57 pm | Permalink

      The Laffer curve has never claimed that tax cuts always produce more tax revenues. It even warns against setting tax rates too lower.

      Switzerland is able to have lower tax levels than the UK because their GDP per capita is nearly twice that of the UK. They also have lower levels of unemployment.

      Reply They have no CGT!

      • Richard1
        Posted October 23, 2013 at 4:03 pm | Permalink

        Yes – and why do you think they have higher GDP / head and lower unemployment? Its the same reason as Hong Kong, Singapore etc have managed dramatic improvements in GDP / head – small government and low taxes.

        • Credible
          Posted October 23, 2013 at 9:25 pm | Permalink

          If you have a look at a list of the high-rate levels of taxation country by country you will see that there is no correlation between that and economic success.

          • Richard1
            Posted October 24, 2013 at 9:00 am | Permalink

            I do not think you have any basis for this assertion. There is a clear correlation between smaller govt / low levels of tax/GDP and long term growth. That is why countries like Singapore and Hong Kong have risen to match western levels of GDP/head, whereas countries like Zimbabawe have experienced decline. We see the same effect comparing eg the US and UK over a long period, West Germany with East Germany etc.

        • Bazman
          Posted October 24, 2013 at 5:22 pm | Permalink

          Hong Kong, Singapore and Zimbabwe are hardly a good comparison with the UK they are highly undemocratic for a start and quite small. How do you square of your dogma with countries like Norway or Germany? As pointed out to you before the laffer curve does not just say lower taxes mean more returns. This is your interpenetration of it.
          See previous unanswered questions by yourself on this.
          http://johnredwoodsdiary.com/2013/10/01/lower-taxes-for-all/
          When you come up with somthing new tell us.

          • Richard1
            Posted October 26, 2013 at 10:14 pm | Permalink

            Each country is of course different. Norway has exceptional natural resources which enable a huge govt surplus – and quite low taxes in fact. Germany has done an exceptional job in improvements in competitiveness. Both countries run surpluses / balanced budgets. The UK under Labour saw rocketing deficits and tax increases. It is legitimate to ask why Hong Kong and Singapore have been such successes whereas so many countries which were at similar wealth levels in 1960 have not been. The answer is capitalism is a successful economic model, whereas socialism is not.

          • Bazman
            Posted October 27, 2013 at 12:16 pm | Permalink

            Germany and France are very socialist countries unfortunately for your dogma. Singapore and Hong Kong are undemocratic. You proposes less socialism and less democracy? Sounds dangerous and expensive. What will you do with dissenters and the ones not part of your prosperous utopia?

  3. Hope
    Posted October 22, 2013 at 7:56 pm | Permalink

    It would fall a lot faster by being out of the EU and stopping the vast amount of contribution the UK makes. Limit overseas aid to an amount we can afford and only to countries the UK decides who to give its money to not the EU or any other third party.

    • Dan H.
      Posted October 23, 2013 at 9:49 am | Permalink

      International development isn’t actually a bad thing, but only if it is money we can spare. Let us instead mandate a healthy 5% of the surplus the country generates, after debt payments and everything else is paid. At the moment we’re running a deficit, so cannot afford to give money away, but rest assured that at some point in the future, we shall be running a surplus and will thus have money to give away.

      • Denis Cooper
        Posted October 23, 2013 at 11:33 am | Permalink

        No, let’s not do that; if the government ever has a surplus, which seems a distant prospect, let’s use it to pay off some of our debts.

  4. Andyvan
    Posted October 23, 2013 at 4:54 am | Permalink

    Well some good news then. The government has managed to increase it’s theft from the productive even more than the increase in cost of it’s rampant waste and vote buying policies. Certainly brightened my day.

  5. alan jutson
    Posted October 23, 2013 at 8:09 am | Permalink

    Never know, if the Government had actually controlled spending as they promised, we may have actually cleared the deficit by 2015.
    Then we could have had some real tax cuts by now, and the economy may have grown earlier and picked up sooner, as people spent more of what was left of their own money.

    As it is, our overall debt will have more than doubled by 2015.

    Stilll, better where we are, than with the Balls plan.

    • Tad Davison
      Posted October 23, 2013 at 3:27 pm | Permalink

      A lot of us were saying precisely that Alan, to get the pain out of the way early on. As you so rightly point out, things could have been a lot better by now, and I totally agree with you on ‘the Balls plan’.

      Tad

  6. uanime5
    Posted October 23, 2013 at 12:59 pm | Permalink

    Income tax revenues have been well up so far this year, following the cut in the higher rate, despite the increase in the tax threshold taking more people out of paying any income tax.

    Growth increased in the first quarter of this year, the tax cut for higher rate taxpayer was introduced in the second quarter. Thus the higher rate tax cut cannot be causing all the increase in tax revenues.

    If income tax revenues are high this year it’s most likely because the wealthy deferred their bonuses for several years so that they could benefit from this lower tax rate. So while revenues will be high this year they will likely fall sharply next year.

    It would also be interesting to know if those who aren’t benefiting from the higher rate tax cut are also paying more in tax revenues.

    • Chris S
      Posted October 23, 2013 at 10:10 pm | Permalink

      I hope you will admit you were wrong this time next year when tax receipts are up again.

      The amount of income deferred because of the 5% reduction in income tax will have been relatively small : probably less than the money paid out
      For unjustifiable automatic increments across the public sector.

  7. Kenneth R Moore
    Posted October 23, 2013 at 1:29 pm | Permalink

    Yo Redwood!,

    After the humiliating 1997 election defeat, Major should show a little humility and go quietly into retirement. Will someone at Conservative HQ please tell him to shut up …I was sick of his EU loving socialist leaning views when he was in office in the 90’s and I certainly don’t want to hear anymore of his nonsense. Why does he think his judgement is so sound when his own wrong headed thinking caused his own party so much harm.

    • Tad Davison
      Posted October 23, 2013 at 3:28 pm | Permalink

      Spot on KM!

      Tad

    • APL
      Posted October 25, 2013 at 4:43 pm | Permalink

      Kenneth R Moore: “Major should show a little humility and go quietly into retirement.”

      Mr Redwood, would you kindly put in a word along the same lines for Mr Ken Clarke too, please?

      Perhaps we could at the same time wean him off the minister with out portfolio, ‘teat’ too.

  8. Lindsay McDougall
    Posted October 24, 2013 at 12:34 am | Permalink

    What is the comparison of cumulative borrowing for April to September compared with same 6 months last year? Hopefully, more than 10% less.

  9. Mark Chaney
    Posted January 17, 2014 at 12:11 am | Permalink

    The deficit is rising, simply because living standards are falling to a point where social and industrial unrest will cost the country dearly.

  • About John Redwood


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

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