Lots more tax to come from the Autumn Statement

 

             The documents connected to the Autumn Statement include an interesting table which shows that the majority of the additional deficit reduction the OBR is now forecasting will come from increased tax revenue.

              In 2014-15 an additional £9.6bn of tax is 77% of the extra deficit reduction (compared to the March position). In 2015-16 £13.2bn of extra tax is 79% of the extra deficit cut, and  in 2016-17 ££14.5bn of extra tax is 91%.(OBR Table 1.3 p.14).

              Some of this revenue is the result of the higher growth forecasts, but some of it comes from the so called anti avoidance measures. These are tax rises of one sort or another, altering the way existing  taxes are levied. The government aims to get more tax from people and companies who are currently paying the correct amount under current tax law, so they are in that sense tax rises.

           Many will say because they are called anti avoidance measures they are all justified. Nonetheless these new tax measures need examination to see who they take more tax from, and what economic impact that will have. If you stop a legal way of avoiding tax you may also stop certain types of economic activity that depended on the favourable tax treatment.

          Meanwhile the Chancellor correctly underlined the fact that the structural deficit remains obstinately high. The reason for that is very simple. Current public spending has continued to rise in real terms, with a starting position in 2010 where there was an inbuilt large structural deficit from high spending.

             If these forecasts are correct, the UK state debt (excluding pensions) peaks at 80% of our GDP instead of at 85% under the March 2013 Budget plans. Most of this is down to these further increases in tax.

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72 Comments

  1. Nick
    Posted December 6, 2013 at 8:50 am | Permalink

    You don’t get it do you?

    People are pee’d off because you are screwing them with taxes.

    You on the other hand are increasing spending. It’s up yet again.

    So debts off the books.

    Lies about reducing borrowing when they amount of borrowing has gone up.

    Parital defaults on the state pensions because you’ve hidden what’s owed and you can’t pay.

    The pensions debts are increasing at 734 bn a year. That’s why you cant’ admit to the amount being owed. It would be transparent that people are being defrauded.

    It’s going to be interesting seeing how you handle that question at a hustings

    Reply Of course I get it – I have been a voice for lower spending for a long time. The pension debt is not escalating at anything like the rate you quote. The amount of additional borrowing is falling; the amount borrowed is of course still going up, as I always point out.

    • Hope
      Posted December 6, 2013 at 11:37 am | Permalink

      You are correct JR and you have said it many times. What you do confirm is that there is not going to be an 80/20 percent split between spending cuts and tax rises that the Tories promised.
      IDS welfare reform pledge of jam for tomorrow is very shaky as well, which is one of the biggest budgets that needs to be cut.

      Therefore there is NO real difference between Milband’s Old Labour and Cameron’s New Labour. Osborne in opposition agreed and supported Labour’s spending plans and it has become a reality. Therefore if you want a to vote for a fiscally prudent conservative party vote UKIP.

      BTW, good to see Nigeria has a space programme that we help to support through over seas aid.

    • Lifelogic
      Posted December 6, 2013 at 12:49 pm | Permalink

      Indeed more tax increases on Capital gains, restriction to principal residence overlap reliefs and lot of other areas and further inconveniences for the productive and much more parasitic activity for accountants, lawyers and bureaucrats.

      Tax, borrow, chuck down the drain and inconvenience the productive.

      PS Can someone please tell the BBC we have already had quite enough of Mandela coverage it is even worse than Lady Diana. He was after all 95 whatever his many talents were.

      • Hope
        Posted December 6, 2013 at 2:57 pm | Permalink

        The debt continues to grow at £3,000 a second. Structural deficit will not be touched until 2018/9, it was meant be fixed by 2015 . The spending cuts are so slow no one has noticed any taking place, that is why Cameron has said no tax cuts for the middle classes for the next 10 years. However, he can afford to throw away our taxes on: EU at £55 million every day, not collect £120 Billion in taxes because of the capital freedom imposed by the Maastricht Treaty, continue to let welfare grow with mass immigration, continue to give away £14 billion a year in overseas aid, 10 percent higher bills based on solar energy and continue universal welfare credit with free school meals. The autumn statement was a failure and a kick in the teeth for the conservative prudent who accept personal responsibility.

      • Credible
        Posted December 6, 2013 at 7:08 pm | Permalink

        The coverage was similar on other channels, but you seem to be inexplicably drawn to the BBC like a moth to a flame.

        Nelson Mandela, although not without faults like us all, was a better man than all the current UK politicians put together. If the whole lot could achieve just half of what he did it would be impressive.

        • Lifelogic
          Posted December 7, 2013 at 12:40 pm | Permalink

          Well I tend to get most of my input from Radio 4 as I am usually working or driving, sometimes the Daily Politics and Newsnight, thought Newsnight is rather a pathetic joke now especially with the lefty dope, Kirsty. I do not pay for Sky.

          Fine on Nelson Mandela, but we know all this already. Do we need the endless repeats for hours on end. Also the absurd BBC political spin they put on it all. Perhaps they should have a special BBC loves Mandela Channel for a month or two – for the few licence payers that are interested in these endless regurgitations. Then the channel could have two months each of “The BBC loves Quack Green Science”, “The BBC loves more tax”, “the BBC loves big government”, “the BBC lover digging holes and filling them in again economics, “the BBC loves the antidemocratic EU”……….

        • Chris S
          Posted December 7, 2013 at 1:55 pm | Permalink

          Sorry, Credible you are wrong. The BBC coverage was far more over the top than other news organisations.

          On Thursday night after 10pm we had the ludicrous situation of the same BBC news feed running on BBC 1 and their rolling news channel at the same time plus wall to wall Mandela on Newsnight extended till midnight and Radio 4. I didn’t check but I expect it was also on Radio 5 live as well.

          Since then we have had Mandela pushed down our throat continuously even extending to a Mandela special ” From our own Correspondent” on Saturday morning.

          You have to ask, short of all channels broadcasting solemn music, what have they held in reserve for the death of the Queen ?

          In fact I was watching BBC 2 when it was announced and we were presented with a black band on the screen saying “breaking News on BBC1″ I switched over expecting to hear of a Royal death.

          Mandela was a great man and I have huge respect for the way he peacefully transformed his country but the BBC coverage has been right over the top. I suspect audiences figures for BBC News programmes have fallen since Thursday and won’t pick up until normality returns.

          • Lifelogic
            Posted December 8, 2013 at 9:24 pm | Permalink

            Indeed, I expect rather less coverage from the BBC for the Queen than for Mandela and certainly it will be far less sycophantic.

      • lifelogic
        Posted December 6, 2013 at 9:34 pm | Permalink

        In fact I was already sick of the BBC Mandela coverage when they jumped the gun a few weeks back and gave us health reports (all mainly speculative) on his health every few minutes for several days.

      • APL
        Posted December 7, 2013 at 8:46 am | Permalink

        Lifelogic: “Can someone please tell the BBC we have already had quite enough of Mandela coverage it is even worse than Lady Diana.”

        Mandella was a terrorist. It has been the fashion for ages for the BBC to suck up to any and every (terrorist? ed) that crosses the BBCs path. Gerry Adams, Martin McGuinnes, Yasser Arafat and Mandella – who perhaps isn’t quite in the same category as the former, none the less you get a flavor of the BBCs predilection for (words deleted ed).

        Reply Mr Mandela helped secure the end of the brutal and unacceptable apartheid, and became a great peace maker

        • APL
          Posted December 7, 2013 at 10:59 am | Permalink

          JR: “and became a great peace maker”

          Everyone can be a ‘peace maker’ once you have got what you want. It’s how you go about achieving your goal, that’s the measure of a person.

          (The opposition to apartheid? ed) wasn’t above bombing civilians, nor sanctioning the most brutal method of extra judicial execution – necklacing, filling a car tyre with petrol and putting it around the victims torso and setting fire to it.

          Odd description of a ‘peace maker’.

        • stred
          Posted December 7, 2013 at 11:45 am | Permalink

          BBC speak.
          Blowing up a hotel on Brighton seafront= Terrorism
          Blowing up government buildings or a railway station in South Africa = Sabotage
          It all depends which side you are on.

          Nelson Mandela was a respected politician because he had the intelligence to realise that you don’t make progress and can cause a disaster if you beat the other side into the ground. No doubt he studied the way in which the First World War and the Second were resolved.

  2. alan jutson
    Posted December 6, 2013 at 9:01 am | Permalink

    Deficit inroads will be paid from tax out of growth !

    Once again if any proof is needed, that we are still as a Country living beyond our means to pay.

    Once again we have spending and tax policies calculated on a guess.

    When oh when, is any government going to only spend what they know they have, and simply base it on just 80% of the last KNOWN tax take from the last financial year, and then use the 20% surplus to pay off DEBT.

    If we have little growth, then we are still running at a deficit because we are spending too much and thus increasing debt.

    • alan jutson
      Posted December 6, 2013 at 9:09 am | Permalink

      So the Government plans to extract more tax from those who are paying the correct tax !

      I guess they plan to rewrite, or add clarification to the tax laws in a much more simple way, (good news) so that the spirit of taxation law is upheld.

      All that is fine as long as it is not retrospective, because if you are working to the present rules, and taking advantage of accepted legal means to not pay more than you need, then you are guilty of nothing other than commonsense.

      The power is with Parliament, if they do not like the present system then change it.
      Make the rules, simple, clear and perfectly understandable, and if you allow tax breaks for any reason, then expect people to use them.

      • bigneil
        Posted December 8, 2013 at 12:20 pm | Permalink

        if they tax the ones who DONT pay the correct tax these people only use other forms of claiming it back – i.e – expenses and claims for electricity for stables – moats for duck ponds etc. – so ALL the tax burden will be pushed down and down the people pile – to the bottom tier workers.

        the other day we see 100+ asylum seekers/refugees/illegals (use whichever term suits) put up in a hotel for weeks and waited on – -how on earth can any one in this government and banker caused mess justify this ?? – -can you imagine the calls they made home on their smartphones?? – wow -they love us here so much !!!!! get on the first lorry you can !!!

        and this while English people are queueing at food banks ?? – -every politician from the 3 main parties should be ASHAMED of themselves – - -the rest of the world sees us as a joke – with politicians kicking the English nation to death – -people who have worked and paid taxes for years lose their jobs and houses – and are then thrown on the homeless heap – -WHILE FOREIGNERS -(words left out ed) -ARE PUT IN A HOTEL AWAITING THEIR TOTALLY “FREE EVERYTHING TILL THEY DROP ” LIFE.

        I AM GLAD I AM NEARER THE END OF MY LIFE AS I DONT WANT TO SEE WHAT (problems ed) POLITICIANS ARE CREATING – ONE THING FOR SURE – -THE POLITICIANS WONT BLAME THEMSELVES.

        Reply No MP claimed for a duck house – one asked if he could and was wisely told he should not. One MP claimed for a proportion of all his house expenses in the constituency and foolishly filed a statement of all his domestic costs: he did not claim for the moat cleaning.

    • Brian Tomkinson
      Posted December 6, 2013 at 9:44 am | Permalink

      Alan,
      “When oh when, is any government going to only spend what they know they have,”
      Never, as long as we have any of the three main parties in Westminster who have a shared economic manifesto which is tax, borrow, spend and waste.
      Osborne is borrowing even more money to give to the EU as published in today’s Telegraph: “Britain will give an extra £10bn to the European Union because of the weakness of struggling eurozone economies, it has emerged.
      The British contribution to the EU will rise dramatically from £30bn to £40bn over the next five years, the Office for Budget Responsibility said.
      It includes a surprise £2.2bn jump in funding to £8.7bn this year.”

    • oldtimer
      Posted December 6, 2013 at 9:56 am | Permalink

      I fear your suggestion is far too sensible for our political masters. They are all consumed by political points scoring – as we witness daily in the HoC if you can actually bring yourself to watch it.

      On present policies and on its present trajectory, this country is doomed to long term relative and absolute decline as more and more people discover that their standartd of living is in long term decline. Miliband has spotted this and has made it an issue – though he is clueless about remedies. On the evidence to date, the Cameron-Osborne-Clegg axis is equally clueless because they fail to take the substantive measures to do anything about it. Instead the hole they are digging for us all is getting deeper and deeper with no sign of a ladder to get out of it.

    • Hope
      Posted December 6, 2013 at 2:58 pm | Permalink

      Well said. JR has pointed this out on many occasions and that is why he is sidelined by the New Labour Cameron government.

  3. Brian Tomkinson
    Posted December 6, 2013 at 9:32 am | Permalink

    JR:” Meanwhile the Chancellor correctly underlined the fact that the structural deficit remains obstinately high. The reason for that is very simple. Current public spending has continued to rise in real terms, with a starting position in 2010 where there was an inbuilt large structural deficit from high spending.”
    Osborne pledged to eliminate this by 2015. He has failed his own objective because he never tried.
    As for the debt peaking at 80% of GDP, perhaps you would give us your reference for that as the Red Book and OBR report say it will “peak at 85.6 per cent of GDP in 2016-17, before falling to 84.8 per cent of GDP in 2017-18.”
    So much debt still accumulating and yet we read in today’s Telegraph: ” Britain will give an extra £10bn to the European Union because of the weakness of struggling eurozone economies, it has emerged.
    The British contribution to the EU will rise dramatically from £30bn to £40bn over the next five years, the Office for Budget Responsibility said.
    It includes a surprise £2.2bn jump in funding to £8.7bn this year.”
    I don’t remember hearing Osborne “announce” that yesterday.

    • Hope
      Posted December 7, 2013 at 9:11 am | Permalink

      Howev, it is disable to claim that they cannot afford pensions, university education, helping the elderly with fuel poverty and so many other valid causes for help. To borrow and give away to the EU is absolutely disgusting when ther is already so much waste without outcome for the people of this country. And then we have the idiot claim by Clegg that it is not patriotic to be in the EU!

  4. stred
    Posted December 6, 2013 at 9:41 am | Permalink

    Here are some ways to increase tax which Mr Cameron may like to consider.

    When a farmer is granted planning permission and his land increases in value this is highly taxed. So when a landowner is given permission for a windfarm or PV field, he will earn a large income from subsidies and his land must increase in value. This could notional value and the ‘windfall’ income could be taxed at say 75%.

    When a manager working for the State is made redundant and then remployed in a similar position in a nearly identical organisation, this could be considered a windfall and similarly taxed.

    When the owners of a PFI are found to be costing the taxpayer far more than it would otherwise, this could be considered a windfall from the incompetence of officials and therefore taxed.

    Where officials are found to have cost the taxpayer a vast amount from incompetence, there could be an incompetence tax, set against their pension.

    Dream on, make your tax return and pay up, with an extra bit on account.

  5. Mark
    Posted December 6, 2013 at 10:47 am | Permalink

    The Liberal Democrats seem to think that a mansion tax can pay for any number of measures. The Labour party think the same about taxing bankers. Osborne (and I suspect Alexander) seems to think that anti-avoidance can achieve the same ends. In no case is it true.

    Before we get to the G-plan (moving the furniture on the Titanic) someone needs to grasp that only controlling spending will do.

  6. Seth the pig farmer
    Posted December 6, 2013 at 10:49 am | Permalink

    I wonder how much of the good news stemmed from the decision to freeze the tax on fuel combined with the global drop in prices.

  7. Man of Kent
    Posted December 6, 2013 at 10:49 am | Permalink

    We seem to have plenty of elastic spending commitments judging by the way public expenditure is going.
    Sadly tax cuts are largely frowned upon despite the ‘dynamic ‘ advantage these bring.
    You, JR ,have often advocated lower tax rates to increase revenue .
    The lowering of the top tax rate from 50-45% has proved the Laffer Curve.
    Why don’t we do more ?

    • uanime5
      Posted December 6, 2013 at 5:21 pm | Permalink

      The lowering of the top tax rate from 50-45% has proved the Laffer Curve.

      Care to explain how lowering the top tax rate from 50-45% has proved the Laffer Curve. Make sure you explain why growth started to increase in the first quarter of 2013 even though the wealthy didn’t get a tax cut until the second quarter.

      • Edward2
        Posted December 7, 2013 at 8:50 am | Permalink

        Uni
        Do you want very high tax rates tageted on the highest earners to generate more revenue or to satisfy a political desire?
        Despite your repeated predictions you have been proved wrong, along with the shadow chancellor, as revenues have risen.
        The left’s slogan “tax cuts for millionaires” cannot be right if they are now paying more can it?

        • uanime5
          Posted December 7, 2013 at 11:48 pm | Permalink

          My prediction was that tax revenues would be higher this year because the wealthy deferred much of their income for several years. I also predicted that tax revenues would fall in 2014 because they wouldn’t be boosted by this deferred income. As it’s not 2015 it’s not yet possible to know if my prediction will be right or wrong.

          Also also the millionaires deferred their taxes they’ve paid less in tax, not more.

          Reply Income tax revenues are forecast to rise in 2014 with the lower top rate, and I agree with the official forecasts on that.

      • Richard1
        Posted December 7, 2013 at 9:04 am | Permalink

        Tax receipts from the group paying this top rate have risen following the cut. Similarly and even more striking, receipts from capital gains tax fell after the rate was rocketed by this govt from 18% to 28% (even though stock markets and property prices rose). Only someone with their head in the sand would deny the veracity of the Laffer curve.

        • uanime5
          Posted December 7, 2013 at 11:54 pm | Permalink

          Tax revenues have risen because the wealthy deferred their income. As a result expect tax revenues from the wealthy to fall in 2014.

          Capital gains tax was raised because people were using clever financial arrangements to paying CGT instead of income tax. GCT was raised specifically to prevent the wealthy avoiding their taxes in this way. After GCT was raised the wealthy had to find another way to avoid paying taxes, so GCT revenues fell but other tax revenues rose.

          Finally the Laffer Curve states that if taxes are too low you won’t raise the maximum tax revenues. It doesn’t state that lower taxes always raise more tax revenues.

          • Edward2
            Posted December 8, 2013 at 7:30 pm | Permalink

            Uni
            If you are accepting that rates set too low will lead to reduced revenues then it should follow that setting rates too high will also lead to lower than expected revenues.
            Its not about politics but about setting optimal rates to capture the tax needed in a competitive world.

    • Credible
      Posted December 6, 2013 at 7:56 pm | Permalink

      The Laffer Curve is a speculative line on a graph, not an ideology.

  8. Narrow shoulders
    Posted December 6, 2013 at 11:15 am | Permalink

    Much was made yesterday in parliament and on this blog that 30% of income tax is paid by 1% of individuals.

    I really do have nothing against the cream rising to the top and succesful risk taking people getting the rewards they deserve but I would be hugely interested to see the income growth of this sector during a time when other wage slaves found their income reducing in real and cash terms.

    If I earn 1 million and pay a couple of extra percent in tax I will ot feel it as much as someone earning 20 thousand or the real tax cash cows of this government the higher rate tax payer.

    Smaller government and less tax all round please.

    • libertarian
      Posted December 6, 2013 at 1:55 pm | Permalink

      NS

      Whilst I agree with your overall sentiments especially on less tax and government all round.

      I’m struggling to make sense of your views on the INCOME of the rich.

      If you earn £1million per annum this is what the government take ( I used the HMRC calculator )

      They will take £436,098 income tax and £161,000 in national insurance

      a total of £597,098

      Do you not think that a £1m earners cost of living is also vastly higher and therefore actually the opposite is true a small % increase in tax take has a far bigger impact. Of course the wealthy have the option of downsizing.

      The rich pay for the same things as the poor food,heating, light , council tax, petrol booze fags etc. So the cost of living rises for everyone proportionally sure the wealthy have a better chance to deal with it, but why do you assume income growth different to anyone else’s?

      I’m continually amazed by this British obsession with caring what other people earn as if they stole it off the poor. How about recognizing as the official figures show that no only do the wealthy contribute the MOST to society, they use far less of societies resources AND they create the jobs and economic growth that the country depends on.

      We should be celebrating and encouraging this as well as trying to create even more opportunities for larger numbers of the population to also join them as high earners.

      For the avoidance of doubt I do not earn £1m per year or anything like it.

    • uanime5
      Posted December 6, 2013 at 5:25 pm | Permalink

      Much was made yesterday in parliament and on this blog that 30% of income tax is paid by 1% of individuals.

      That’s because the UK is an unequal society where 1% of the population has nearly 30% of the wealth.

      If I earn 1 million and pay a couple of extra percent in tax I will ot feel it as much as someone earning 20 thousand or the real tax cash cows of this government the higher rate tax payer.

      Someone earning £1 million who has a 1% tax increase will experience far fewer problems than someone earning £20,000 who has a 1% tax increase. So the wealthy will feel a tax increase far less than the poor.

  9. Terry
    Posted December 6, 2013 at 11:57 am | Permalink

    - And we thought Gordon Brown was the master of stealth taxes! This is just more smoke and mirrors accounting isn’t it? How can the deficit be reduced by increased taxation? To reduce the deficit the Government must reduce their spending. Why can’t they do that?

    The burden of extra taxation merely increases the income to pay for the deficit, it does not reduce it. Meanwhile, our National debt pile grows higher and someone, sometime, will have to address that very serious problem for the future of the UK. But not now, apparently.

    I make the irresistible conclusion that all the Government is doing now is solely for the purpose of bribing the electorate to vote for them in 2015. Just as previous governments have done before them. Had Cameron and co stuck to their original plan of ‘proper’ austerity from 2010 and told the Cleggites to like it or be left outside they would not be in this position and their original forecasts would have been on target. Mrs T would have pressed on with it because she had more bottle than the too-young-t0-govern yuppie luvvies we have at present. And those back stabbers who brought down the Iron Lady should be put in the dock alongside her Labour and Tory successors, for they have all committed themselves and regretfully, ourselves, against the wishes of us, the people of Britain. Parliamentary democracy must return to the HoC before MPs regain the respect of the electorate and this is not the way to do it.

  10. Iain Gill
    Posted December 6, 2013 at 1:16 pm | Permalink

    http://www.theguardian.com/technology/2013/dec/06/technology-experts-fast-track-uk-visas-funding

    Not satisfied with printing uncapped ICT work visas bringing in large numbers of almost exclusively cheaper (employees ed) to displace Brits from the workforce, Cameron is going to fast track their visas…

    Who on earth is advising him?

    • Denis Cooper
      Posted December 7, 2013 at 1:31 pm | Permalink

      I find that on paper this only applies to “world-class technology experts”, who will be allowed to use “the exceptional talent visa route, which is usually reserved for international leaders in science and the arts who have been approved by expert organisations such as the Royal Society or Arts Council”.

      The reality may be very different; we already have the government pretending that if a foreign student can get a job paying not too far below average wages after he completes his studies then he must be among the “brightest and best” and so he should be allowed to settle here, and there will be no limit on the numbers of those average or below average, not to say “mediocre”, persons who are allowed to use that immigration backdoor.

  11. Denis Cooper
    Posted December 6, 2013 at 1:49 pm | Permalink

    It is surely good news that the government is now having to borrow less than a fifth of all the money it is spending, rather than having to borrow a quarter as before.

    At least, I think it’s now a bit less than a fifth … just imagine that you had an income of only £20,000 a year and you were spending £25,000 a year, with no prospect of even getting your annual income and expenditure to match for another five years, let alone being in a position to start paying off your accumulated debts …

    • zorro
      Posted December 7, 2013 at 7:43 pm | Permalink

      No need to imagine……you wouldn’t be able to spend what you didn’t have and would go bankrupt if you couldn’t pay your existing debts……

      zorro

  12. Atlas
    Posted December 6, 2013 at 2:26 pm | Permalink

    So, government spending is not really being reduced after all. Is this the effect of the Lib-dems?

  13. Leslie Singleton
    Posted December 6, 2013 at 2:27 pm | Permalink

    The latest use, rather misuse, of the word “avoid”, after decades in which absolutely everyone agreed and knew full well what was meant, is just a judgement by today’s so-called Conservatives that is wrong and which can be added to all their other misjudgements. The use of the word is tendentious and unnecessary and in all cases “legally not paying” can be substituted for “avoiding”. You refer to a “legal way of avoiding tax” by which you logically mean “legal way of legally not paying tax”. Tautology at best, irritating irrational and misleading at worst. Just an appeal to the masses I imagine, perhaps encouraged by an Australian unfamiliar with our classic case on the subject. At least you, John, seem aware of this from your insertion of “so-called”. Bravo for that. If it is not illegal that should be the end of the discussion.

    • uanime5
      Posted December 8, 2013 at 12:01 am | Permalink

      If it is not illegal that should be the end of the discussion.

      Given that many tax avoidance schemes have not been approved of by the courts and the courts have been know to declare tax avoidances schemes as a form of tax evasion claiming that something is tax avoidance isn’t a valid reason to end a discussion.

  14. Neil Craig
    Posted December 6, 2013 at 2:49 pm | Permalink

    Of course if we had serious growth (rest of the world average 6%) we would have both more income and the debt falling as a % of gdp.

  15. Rods
    Posted December 6, 2013 at 3:26 pm | Permalink

    This is the most left wing Conservative administration that I have lived under. Why do socialists feel they have a divine right to keep most of the income from the sales of our hard earned skills and labour, and then tell us how lucky we are where they let us keep a little bit of it.

    Much like in feudal times when the Lord of the manner and his or her servants took the majority of the wealth generated from the surfs on the promise of ‘looking after your interests’, so today the new Lords of the manner and their civil servants take the majority of what you earn once you are a little bit north of average wages, so if you are an above average wage earner and more than 50% of your economic output is legally stolen by the state in the form of taxes. you are now an effective slave of the state.

    They then generously use it to bolster their interests and create their ever expanding little empires to try and fix all of the ills of the world through Overseas Aid, subsidising rich european farmers, giving many in Brussels a lifestyle that the majority in the UK can only dream of, subsidising the feckless and workshy along with more and more subsidies for expensive unreliable power generation systems that don’t work if there is no wind and don’t work if it is the wrong sort of wind while closing cheap continuous generation systems that do work, all in the name of some fringe religion or cult called climate change.

    They then have the ‘grand projects’ to spend yet more money on. This government’s pet one is expanding expensive to build and even more expensive to run victorian technology in the form of HS2 I can describe it in six words “white elephant from London to Birmingham” although it take them 55,000 pages, isn’t wonderful what you can produce when somebody else is paying for it!

    Then we have ring fenced departments who spend more and more, to achieve an effective real world less and less.

    But what they currently take from us is not enough so they borrow, not only to further burden us but also in a morally bankrupt way by stealing our children, grandchildren and great grandchildren’s wealth, many of whom have yet to be born, where gilts are currently being issued that mature in the 2060′s.

    Now with 650 MP’s the majority seem to have accepted that they do not have the imagination or necessary skill to run the country so they are happy to spend even more of our money to delegate in to a supranational elective dictatorship in Brussels who in return generously impose about 80% of our laws.

    Now I’m not one to sit and do nothing when things are seriously wrong like government laws, regulation and spending is in this country. So lets explore what the current alternatives are for voting for the parties in Westminster: Vote Labour get big tax rises and much more socialist policies, vote Lib Dem get big tax rises and much more socialism policies or vote Conservative and get slightly lower tax rises and slightly less socialism. Not much of a choice is it?

    My solution I’m in the process of emigrating with my businesses, so I’m taxed less, regulated less and can invest more in creating wealth, not only for me but where I will start employing people again also spreading the created wealth to those who help. It called enterprise and capitalism and sadly seems to have largely died a death in this country through a 1000 new regulations and tax rises.

    • Denis Cooper
      Posted December 7, 2013 at 1:20 pm | Permalink

      The government will not be sorry that you are emigrating, as it will help them meet their target for net immigration …

    • uanime5
      Posted December 8, 2013 at 12:07 am | Permalink

      so today the new Lords of the manner and their civil servants take the majority of what you earn once you are a little bit north of average wages, so if you are an above average wage earner and more than 50% of your economic output is legally stolen by the state in the form of taxes.

      Given that the rich are getting richer it’s clear that they’re the new feudal lords, not civil servants.

      subsidising rich european farmers

      If these farmers are rich then why are they among the lowest paid people in Europe?

      Now with 650 MP’s the majority seem to have accepted that they do not have the imagination or necessary skill to run the country so they are happy to spend even more of our money to delegate in to a supranational elective dictatorship in Brussels who in return generously impose about 80% of our laws.

      What are you referring to? It can’t be the EU because they only make 7% of our laws.

      My solution I’m in the process of emigrating with my businesses, so I’m taxed less, regulated less and can invest more in creating wealth, not only for me but where I will start employing people again also spreading the created wealth to those who help

      Given that someone will take over your market share after you leave the overall loss to the UK will be minimal.

      • Denis Cooper
        Posted December 8, 2013 at 1:09 pm | Permalink

        “It can’t be the EU because they only make 7% of our laws.”

        You’ve been corrected on this before, and more than once, and in detail, and yet you keep repeating the same falsehood.

  16. uanime5
    Posted December 6, 2013 at 5:26 pm | Permalink

    Given how almost all the OBR’s forecasts have been wrong there’s no reason to believe that this one will be correct. We could have a repeat of 2010 when the OBR predicted 2% growth and the UK recovering due to higher taxation by 2013. The result was flat lining for 3 years due to Osborne’s austerity plans.

    Also the Government won’t be popular with the public if they continue to allow large companies and the wealthy to avoid paying most of their taxes at a time when normal people have falling wages and living standards.

    • zorro
      Posted December 7, 2013 at 7:47 pm | Permalink

      Agree with you on OBR forecasts…..

      zorro

  17. ian wragg
    Posted December 6, 2013 at 5:28 pm | Permalink

    Contribution to Brussels expected to rise £10 bvillion over the next few years due to downturn in EZ. How about less EU spending due to downturn. £1 billion more overseas aid because growth is higher. So those 2 items cancel out any meaningful reduction of the deficit.
    The coalition is a bunchy of (fools ed) who are wilfully destroying this green and pleasant land egged on by the Bilderberg idiots.
    I hope when the chickens come home to roost, all the stupid MP’s who voted for the CCA and stopped us controlling our borders will be charged with treason.

  18. Richard1
    Posted December 6, 2013 at 7:30 pm | Permalink

    There has been criticism that exports haven’t gone up enough. I don’t find that all that suprosong given what a disaster the eurozone is. It should give pause for thought at the bank of England – if you don’t get export growth with a 20% devaluation maybe its because UK exports these days arnt currency dependent as they were. Many exports are services where prices aren’t quoted in £. Perhaps we would be better off with higher interest rates, a stronger £, low or zero inflation and of course lower taxes. Then there would be a real incentive to investment.

    By the way where are those Keynesian economists who used to blog here occasionally when we need them? We need them to eat a bit of humble pie and admit that, like the absurd figure of Ed Balls, they got the UK economy wrong.

    • uanime5
      Posted December 8, 2013 at 12:11 am | Permalink

      Many exports are services where prices aren’t quoted in £.

      The ONS is able to determine how much the UK makes in exporting goods and services. So the prices can be quoted in pounds.

      By the way where are those Keynesian economists who used to blog here occasionally when we need them? We need them to eat a bit of humble pie and admit that, like the absurd figure of Ed Balls, they got the UK economy wrong.

      How exactly did the Keynesian economists get it wrong? They said that the Government needed to simulate the economy by spending money and Osborne got more growth by stimulating the housing market with his 95% mortgages.

      Reply Why did the increases in current public spending in the last Labour years and the early Coalition years fail to protect the economy from the downturn?

  19. petermartin2001
    Posted December 6, 2013 at 11:29 pm | Permalink

    It may seem a silly question but I’d just ask if those who are so concerned about the deficit actually know why it is the problem they think it is.

    To start them off, with one possible reason, I can say that if aggregate spending in the economy is too high then inflation will likely be a problem as employers have to pay ever higher wages for their workforce.

    Can anyone supply a second reason?

    • alan jutson
      Posted December 7, 2013 at 9:10 am | Permalink

      Peter

      Why is a deficit a problem ?

      In very simple terms

      Because if you constantly spend more than you earn you will get further into debt each day, each week, each month, each year..
      Eventually someone will stop lending you money (as you are a poor risk) unless you pay a much higher price for your borrowing.
      Thus you get even further into debt faster.

      Four ways out:
      Cut your expenditure to a level where you can manage the debt repayments.
      Increase your income.
      Do a bit of both of the above.
      Go Bankrupt.

      Same result for personal or government accounts. But for income, read taxation.

      The government by constantly spending more than they get in tax, and assuming growth will cover it all, is like a worker believing they have a job for life and unlimited overtime available to work at will, whilst doing the lottery.

      • Denis Cooper
        Posted December 7, 2013 at 1:18 pm | Permalink

        It worries me that some people ask that kind of question when they have the example of Greece in front of them. But in some cases there is the assumption that the Bank of England could just keep printing money to finance the government’s deficit and that would have no harmful effects, even though they have the example of Zimbabwe in front of them …

        • uanime5
          Posted December 8, 2013 at 12:13 am | Permalink

          Perhaps the reason is that they know of countries such as Japan that have a debt several times their GDP but haven’t suffered from the problems that Greece or Zimbabwe have had.

          The US has also had good growth despite their deficit being larger than it was in 2007 and their debt constantly increasing.

          Reply Japanese debt at 230% of GDP has been financed by the Japanese savers themselves lending at ever lower rates. The interest burden has therefore stayed low and will do so all the time they avoid inflation and higher rates, but will be a problem if those features change.
          The US has had substantial cuts in state and federal spending and made much more rapid progress in cutting its deficit than the UK.

          • Denis Cooper
            Posted December 8, 2013 at 1:18 pm | Permalink

            Of course the UK government could equally ask UK savers to help finance its deficit; but once again Osborne will only allow National Savings to target an additional £2 billion savings, acceptable range zero to £4 billion:

            http://www.telegraph.co.uk/finance/personalfinance/savings/10500426/NSandI-funding-change-could-boost-interest-rates-on-Premium-Bonds-and-accounts.html

            Total household savings in the UK exceed £4,000 billion, but Osborne doesn’t want to borrow any more than another 0.1% of that; he prefers to borrow money from foreigners, and pay the interest to them rather than to the British people.

          • petermartin2001
            Posted December 9, 2013 at 6:34 am | Permalink

            Denis,

            Just what constitutes the deficit and the National debt might be a subject that Mr Redwood might like to write posting on. He’s probably better equipped than I to explain exactly what it is.

            He can correct me if I’m wrong but the deficit is mainly financed by the issue of Treasury bonds. The banks, in normal times, routinely buy these as an alternative to holding too many reserves. However at the moment they pay hardly any so they may as well hold their reserves in cash. QE was the process of swapping bonds for cash.

            George Osborn doesn’t have to borrow from the Chinese to fund his deficit. That’s just a myth.

            Foreign holders of £ sterling, like the Chinese, also hold treasury bonds. If you’ve bought an something on ebay from China then you’ll have paid for it. The Chinese wouldn’t have sent it if you hadn’t! The money then gets paid, probably via Paypal, into a bank in China and often ends up in on deposit at the BoE.

            Presumably, you like having your iphone or whatever and the Chinese like having money in the bank. They could spend their £ on Scotch whiskey or whatever else they like. And maybe they should – it would help close the balance of payments deficit!

            If you look in your wallet you’ll possibly see some of the National debt. Yes, the banknotes you have in there. All money is printed. If the government printed some more and handed it back to you as say a tax refund then the National debt would increase. And your personal wealth would increase.

            If the National debt were ever paid off then you wouldn’t have any money in your wallet at all! No-one would. You’d have to sell something for some other currency -like Euros!

          • petermartin2001
            Posted December 9, 2013 at 6:43 am | Permalink

            Sorry, that last posting somehow shot off before I was ready.

            It should be [2nd para] “they pay hardly any interest so they may …..”
            [4th para] “If you’ve ordered something on ebay from China then you’ll have paid for it”

      • APL
        Posted December 7, 2013 at 6:19 pm | Permalink

        alan Jutson: “Go Bankrupt.”

        Whereupon you/your country are forced to reduce your expenditure to equal your income as you’ll find that for a long time after you’ve declared bankruptcy, no one will lend to you at any price.

        Denis Cooper: “have the example of Greece in front of them”

        Not much about Greece in the news just now, must be all hunky dory in BBC world.

        • Lifelogic
          Posted December 8, 2013 at 9:35 pm | Permalink

          “you’ll find that for a long time after you’ve declared bankruptcy, no one will lend to you at any price.”

          Well actually you are probably a better credit risk after the debts are written off than before. Also if you are no longer paying interest on the old debt you may not need to borrow. Iceland did rather well. Did the UK ever get its money back? For the money they gave out to bank depositors for the defaults?

      • petermartin2001
        Posted December 7, 2013 at 9:44 pm | Permalink

        Don’t misunderstand me I am not saying the debt can go to infinity.

        But, having a debt which is equal to our GNP is not disastrous. In my younger years my own debt ratio was much higher and the interest rates then were much higher than they are now. It is now back down to being about the same as the country’s BTW and I feel quite comfortable with that. Like the country I have never defaulted on debt and never been considered a poor credit risk. Also, like the country, I have assets so that my net worth is by no means negative.

        Not that I totally agree with using a household analogy. It must be remembered that the UK government is an issuer of its own currency, whereas I, like everyone else, is a user. That makes a big difference . The government can set interest rates to be whatever it likes too! I would have like to have been able to do that instead of paying 15 pa %!

        Greece has made a big mistake by giving away its own sovereignty. Adopting the Euro was a disaster. Thankfully the UK government did not make the same mistake.

        If you check the figures I think you’ll find that inflation in the UK is the lowest it has been for many years. The last official figure was 2.2%. I can understand some scepticism over official figures but inflation is just about as low as it will get and wage costs are not a significant factor. Further deflation of the economy would not reduce inflation and it would damage the recovery.

        I don’t believe the government will do that BTW. I do have a feeling that they know that economic recovery is the only real answer to the country’s economic problems. They need to say that a little more loudly. That would be a more optimistic message than this constant fretting about the bank balance.

        Reply The UK has to operate in world markets, and usually runs a balance of -payments deficit. That means overseas investors and overseas markets limit how low for how long UK interest rates can go and how much money the UK authorities can create.

        • petermartin2001
          Posted December 9, 2013 at 10:09 am | Permalink

          ” That means overseas investors and overseas markets limit how low for how long UK interest rates can go and how much money the UK authorities can create.”

          Are you sure this is right? As I understand the workings of the economic system the UK government/BofE has total control over base interest rates. If it want o%, like now, it can have 0% for as long as it likes. Just like Japan has had very low interest rates for the last 20 years.
          The B of E / UK government can create as much money as it likes too. Who’s to say otherwise?
          That doesn’t mean they should. I didn’t say that. I would agree that the avoidance of high inflation is a high priority.

          Reply Japan has be able to keep rates very low for a long time as it is usually in balance of payments surplus and borrows all the state cash from Japanese citizens who put up with the low rates. In the UK’s case with overseas lenders were the authorities to create too many pounds the value could fall away rapidly on the exhanges, making it difficult to finance the balance of payments deficit, and forcing the authorities to raise rates to stabilise the pound and attract foreign savings. Just look at recent history in Brazil, or the UK at the time of the IMF visit in the 1980s.

          • zorro
            Posted December 10, 2013 at 8:08 am | Permalink

            Reply to reply – I guess that you mean the 1970′s under ‘pips squeak’ Healey…… What a different world that was…… I wonder what would have happened if QE had been engaged then…..?

        • Denis Cooper
          Posted December 9, 2013 at 6:15 pm | Permalink

          Peter, I would like to repeat a reply that I made to you on an earlier thread in case you missed it there, explaining the crucial practical difference between money and bonds and why it became necessary for the Bank and the Treasury to arrange a swap:

          “Both bonds and cash are a form of printed government money. Swapping one for the other is not going to have a huge effect on the economy.”

          I don’t know whether you’ve ever tried offering to pay for your groceries with gilts, or for that matter with National Savings certificates … most shopkeepers are a bit fussy about this and expect to be paid in money, legal tender, even if they are prepared to accept a credit card promise that in due course they will be paid in said money.

          Similarly anyone who is due a payment from the government will normally expect to be paid in money; to take a simple example, an OAP would not be pleased to get a letter explaining that because the government had run out of money it was only able to pay part of this week’s pension in cash, but please find enclosed a gilts certificate in lieu of the rest.

          So when the Treasury and the Bank of England agree to indirectly swap their respective IOUs through QE as practised in the UK, with the Bank getting the Treasury’s IOUs, gilts, its present stock being valued at £375 billion:

          http://www.bankofengland.co.uk/markets/Pages/apf/results.aspx

          and the Treasury getting the Bank’s IOUs, money, it does make a difference to the economy if those transactions mean that the government does not run out of money and can still pay all its bills in full and on time.

          • petermartin2001
            Posted December 9, 2013 at 8:05 pm | Permalink

            Denis,

            What you say about paying my groceries is true. I wouldn’t expect to be able to pay with a government bond, or treasury gilt, because the young lady on the checkout wouldn’t be at all familiar with what a genuine one looked like. I wouldn’t be either to be honest! Do they still exist in the paper version?

            And, naturally, because a bond has a value which is a function of time they would be more inconvenient to use than a banknote.

            However, using readily available technology, it would be quite feasible to print a bar code on to a paper bond which could be quickly scanned to give an exact valuation at the point of use. So, conceptually it is quite easy to envisage that they could, in the general economy, function in exactly the same way as printed currency and be treated by the general population as just another form of government money.

            Bankers are already much more sophisticated than the general population so already know the stated equivalence.

            I accept that your view is much more aligned with economic conventional wisdom. But IMO there is good reason to doubt much of that! I’m a Physicist BTW and these kind of thought experiments are considered very useful in resolving tricky questions which can sometimes have counter-intuitive answers.

            PS As I understand the working of banks, they don’t actually lend out their reserves to the public. They may use them to settle accounts with each other. The cash/currency created by QE hasn’t found, and won’t in the future, its way into the general economy.

    • petermartin2001
      Posted December 8, 2013 at 8:42 pm | Permalink

      “Go Bankrupt.” ???

      In voluntary default is just not possible for countries with a sovereign, floating and non convertible currency according to the textbooks.

      Note that Greece is in the Euro so that argument does not apply to them.

      I did originally think that a high deficit might lead to higher interest rates. But not so.

      Inflation, so far as I can find, is the only danger.

      • Denis Cooper
        Posted December 9, 2013 at 6:32 pm | Permalink

        Well, that’s an interesting question … certainly if a sovereign state is issuing its own currency then it will always be able to pay its debts denominated in that currency, however large they may be, and nowadays it would not even be limited by the availability of paper and ink; but on the other hand if that state is importing more from other states than it is exporting, and if it has set about debasing its currency to such an extent that nobody is any longer prepared to accept its currency in exchange for the currencies of its trading partners, then obviously it will have got itself into a very serious situation even if it is not bankruptcy.

        • petermartin2001
          Posted December 9, 2013 at 8:33 pm | Permalink

          Yes. That’s right. I wouldn’t disagree with that. Except that the phrase ” nobody is any longer prepared to accept its currency in exchange for the currencies of its trading partners” is a bit over the top. The exchange rate may fall is what you really mean. Sometimes that can be a good thing. Mrs Thatcher’s government, for good reason, had the pound at pretty close to parity with dollar around 1985 if I remember rightly.

          What you are saying now and the remarks made by Mr Redwood earlier are consistent with the effects of inflation. As far as I can make out, that is the only possible danger of running a current account deficit.

        • zorro
          Posted December 10, 2013 at 8:11 am | Permalink

          It didn’t work for Argentina of course…..

          zorro

          • petermartin2001
            Posted December 10, 2013 at 10:34 am | Permalink

            “It didn’t work for Argentina of course…..”

            Argentina pegged their Peso to the US$ in the 1990′s and borrowed in US$ rather than their own currency. Like countries joining the Euro there seemed some advantages to this strategy and for a time there may have been.

            It all fell apart in 2001 though. That year and the next, the economy suffered a sharp decline; by 2002, Argentina had defaulted on its debt, its GDP had declined by nearly 20% in four years. Unemployment reached 25%, and the peso had depreciated 70% after being devalued and floated.

            The freeing up of the currency led to immediate benefits though and the recovery was relatively swift after that.

            Argentina still has it problems of course. Inflation is about 10%. Unemployment is ~7% but its in a better position for growth than the smaller countries of the Eurozone.

  20. petermartin2001
    Posted December 9, 2013 at 9:19 pm | Permalink

    I would like to thank Mr Redwood for allowing a discussion on questions of the deficit, inflation, gilts/bonds, QE, etc. I suppose I am asking some awkward questions; but, if economics is ever to become a genuine science, awkward questions do need to be asked. Otherwise, there will be no progress made and we will all be doomed to repeating previous mistakes.

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  • 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.
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