It’s official – there is real growth in UK public spending

 

             The Office of Budget responsibility now endorses what I have been saying for the last three years. Public spending is rising in real terms as well as cash terms. Here is the latest OBR Report on the subject:

“Real government consumption remains strong…The latest ONS data indicate that government consumption grew by 1.7% in 2012 in real terms.  It continued to hold up 0ver the first half of this year (2013)…real spending grew by a cumulative 0.8% in the first three quarters…”

They also argue that employment declines in the public sector will be more than offset by rising private sector employment, and will increase public sector productivity:

“Relative to its level at the start of 2011…. we expect general government employment to fall by round 1.1 million by the start of 2019, with around 0.5 million having already taken place.”

Some of you have pointed out that EU spending apparently rises by £10 bn between 2013-14 and  2017-18.  Any rise is unwelcome. As the OBR report makes clear, half of this revised forecast is the result of a change of accounting practice, which strikes the EU spending out elsewhere in the figures and puts it in in the EU contribution line.  The underlying rises in forecast net of the accounting change  are £1.3bn 2013-14, £ £0.6bn 2014-15,  followed by £1.5bn, £1.2bn and £0.5bn, a total of  £5.1bn.

The profile of EU contributions is erratic, falling to £7.3bn in 2014-15  from £8.7bn in 2013-14, rising  to a lower figure than 2013-14 in the next two years before falling again to £7.3bn in 2017-18. The downward pressure on the Eu budget has helped, but the overall figures are still too high at a time when cutting spending in less desirable areas should be a priority.

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34 Comments

  1. Mike Stallard
    Posted December 11, 2013 at 6:41 am | Permalink

    When this coalition was formed after the disastrous election, the main aim seemed to be reducing the debt and immediately cutting the deficit.

    Mr Gove (I was in the room) promised free schools which were truly free, started by parents in underprivileged areas.
    IDS was determined to reform the totally ridiculous Welfare system. He, too, is one of the very best men in the cabinet.
    Then Mr Hammond eventually took over. Quiet, a safe pair of hands. Well spoken. Visited the troops.
    In every organisation, there are some good and some bad people. Here we have an example of three of the most effective ministers in the government.

    Each has crashed. Why? The debt is growing. Why?

    Myself I suspect the totally wrecked Civil Service which, it is becoming increasingly clear, cannot organise a booze up in a brewery. Me? What do I know? But Fraser Nelson in the Spectator is the person who pointed this out.

    If TU/Lab gets in in 2015, God help us all.

    • acorn
      Posted December 11, 2013 at 5:36 pm | Permalink

      Mike, why are you assuming that labour getting in 2015, will be any different to now. All the macroeconomic conditions will still be the same. Even if the 2008 crash had occurred with a Conservative government in office, the outcome would have been just the same. The same “debt” and “deficit” hysteria would have been there if Labour had taken over from the Conservatives in 2010. There was no time for an ideological discussion, it was a press the send money button at the BoE; pass me my brown trousers and open the toilet door time.

      The same civil servants; the same banksters; the same IMF; OECD and BIS, would have been there telling Osborne to do exactly the same as they told Darling to do.

      Most importantly the same Sovereign Currency Central Bank Governors would have been there.

      Neither Osborne or Darling has a Nobel Prise in economics, not that one of those classroom PhD guys would have made any difference. It was down to G8 Central Bank Governors to run the show, because they are the richest guys on the planet. They ISSUE the worlds major currencies, from bottomless pits of money, into the global economy.

      One day the little people will understand that a sovereign country that issues its own currency, can never go broke in that currency; needs never to default on any debt in that currency.

      The Governor of the BoE will hit the brakes on any government (Treasury) that ISSUES (spends) too much money into existence, in the economy and buys up all the available goods and services in that economy, forcing up prices, (Zimbabwe style inflation).

      Why would a sovereign currency ISSUING government need to borrow its own currency when it can create that currency any time it wishes (within reason)?

      If you have a debt to a sovereign currency issuing government, it will only accept payment in its own currency. You can’t pay that debt (taxes) or buy any of its, so called “debt” (Gilts), unless you have some of that government’s currency. So the government has to spend money into existence before it can tax anybody.

      Commercial Bank money is not the same as government money. Bank money can be converted into government money (at an ATM for instance). Government money is not convertible into anything, it is fiat. Not Gold or Bitcoins or anything other than more government money.

      Taxes function to regulate aggregate demand, and not to raise revenue to directly pay for government purchases. Every pound the government spends is brand new, tax money is not recycled but is effectively destroyed when the government gets it back. It takes years to get back all the money it has spent into existence via taxes, because people and firms keep “saving” it to spend (and get taxed on that spending) in the future.

      No financial / casino market spiv or bankster, can out gun a Central Bank governor in his own currency. If you are in a country that does not ISSUE its own sovereign currency and uses someone else’s, then you have to beg; borrow or earn it by selling stuff to foreigners. Like Spain; Portugal and other Eurozoners.

      Sorry JR, got carried away a bit ;-) .

      • Denis Cooper
        Posted December 12, 2013 at 1:39 pm | Permalink

        I would be happier about this if the creation of vast sums of new money by the Bank of England was under proper democratic control.

        But it is not, because MPs decline to take proper responsibility and insist that the Chancellor must have their express approval before he authorises the Governor to embark on another tranche.

        And to the extent that our elected MPs have weakly allowed the creation of new money by the Bank of England to escape from their control they have also allowed the government to escape from democratic control.

        • Joe
          Posted December 18, 2013 at 11:35 am | Permalink

          Hear, Hear.

          People like John, [By that I mean all MP's, regardless of party, really dont have a clue or care a jot, of the abject misery and poverty this has caused.]

          I.E working for nothing for twenty years, owning no capital, not able to afford a rabbit hutch.

          Personally, I would empahthise with ‘ordinary’ people attacking MPS and Bankers(etc ed).

          I dont really care if this offends your sensibilities.

          You’ve destroyed our lives

    • uanime5
      Posted December 11, 2013 at 6:11 pm | Permalink

      Gove failed because his schools have cost twice what they were meant to cost and have been unpopular with parents because they lack qualified teachers, while IDS’ Universal Credit and Work Programme have failed because of uncontrolled spending and poor leadership. So perhaps they weren’t such effective ministers after all.

      It’s not the fault of the Civil Service that politicians didn’t understand the challenges they faced.

      • Edward2
        Posted December 11, 2013 at 9:03 pm | Permalink

        Come off it Uni
        Free schools and academies have been very popular with parents.

        • uanime5
          Posted December 12, 2013 at 9:08 pm | Permalink

          Then why are free schools and academies so under subscribed?

          http://www.bbc.co.uk/news/education-19909369

          It can’t all be due to free schools opening in areas where there’s a surplus of school places as only a fifth of free schools are located in these areas.

          http://www.theguardian.com/education/2013/apr/01/free-schools-opening-cacant-places

          I guess it’s because free schools aren’t popular. But that’s what happens when you copy a Swedish model that is currently failing in Sweden as well.

          • Edward2
            Posted December 13, 2013 at 12:22 pm | Permalink

            What poor articles with some very dodgy statistics Uni.
            Only a few asked and only a few responses.
            Some schools opened less than a year or two with some spare spaces and the article actually stating many were not 100% full because they opened after local people had already made their choices for the years intake.
            Your second article is from the very reliable Guardian quoting the NUT for most of it. But it even having said that it states we need many more schools as there is a shortage of places especially at Primary level.

            But I realise the opening up of choice for parents that previously was not available is something you feel is wrong.
            Strange whenever more choice and more power to the people actually happens socialists are against it, preferring centralised control every time.

      • Lifelogic
        Posted December 11, 2013 at 10:22 pm | Permalink

        Qualified teachers! What is needed is good teachers, teachers who know what they are talking about. Teacher training colleges are (and have been for 20 years) mainly a hot bed of lefty “all will be equal” lunacy.

        What sensible scientist would choose to teach when he has to get qualified in such a teacher training college and then be forced to teach bogus green crap dressed up as science?

        This rather than teaching people to actually think for themselves.

        • uanime5
          Posted December 12, 2013 at 9:09 pm | Permalink

          What sensible scientist would choose to teach when he has to get qualified in such a teacher training college and then be forced to teach bogus green crap dressed up as science?

          No matter how much you dislike the scientific evidence showing that climate change is man made it will never become bad science.

          • Edward2
            Posted December 13, 2013 at 12:25 pm | Permalink

            Brave statement Uni
            “climate change is man made”
            What 100% ?
            Seen the Met Office graphs recently?
            No rises since 2000.
            Go on have a look.

    • Lifelogic
      Posted December 11, 2013 at 10:16 pm | Permalink

      “When this coalition was formed after the disastrous election”.

      Cameron just chucked the election away with his ratting on the EU Cast Iron Guarantee, his giving to Clegg of equal TV billing and his big state, pro EU right on “modernising” left wing agenda.

  2. Martyn G
    Posted December 11, 2013 at 6:54 am | Permalink

    Relatively good news, John. We really must reduce the amount of levy demanded by the EU because according to todays’ DT the IMF is warning the EU that the Eurozone is not, as is claimed, recovering from their financial stew and that “it is premature to declare victory”.
    The IMF for once seem to be living in the real world, quite unlike the EU commissioners and others and it is galling in the extreme for me to see our tax and borrowed money being thrown at a financially dysfunctional, not to say wastrel EU. Much the same as throwing shedloads of our money down the drain would be….

  3. lifelogic
    Posted December 11, 2013 at 7:08 am | Permalink

    More public spending (or wasting as most very clearly is) is the last thing the country needs.

    You say the OBC argues that public sector productivity will increase. I assume this will be measured by how many new laws, pointless regulations, new taxes, parking and bus lane ticket issued, counter productive wars started, second rate educations, botched operations and pointless expensive rail lines completed.

    How much inconveniencing of the productive have you managed this year – using nearly 50% of GDP. Great well done the state sector productivity is increasing hugely!

    I assume all the people flown to the Mandela memorial service by the government and BBC will go down as being productive – what exactly did it produce but tedious TV in the rain?

    The only interesting thing was to see that Gordon Brown has come out of hiding (one assumes he felt safe as he would not be asked about his dreadful past record while at a memorial). Soon we will have four failed ex-Prime Ministers (and Clegg) talking complete drivel on the BBC. Major, Bliar, Brown and Cameron. All four with almost exactly the same “BBC think” drivel of big government, high tax, pointless wars, pro EU, fake green, tax borrow and tip down the drain agenda.

    • lifelogic
      Posted December 11, 2013 at 4:44 pm | Permalink

      The product of the state sector is surely comprised of:

      A. Useful services provided (Such as some of the education system, roads, defence, some police activity, law and order, and a legal system, some health services, bus services)
      B Things that are entirely pointless (Abandoned IT projects and indeed most of what the state sector does to pass the time)
      C Things that are totally counter productive such as inconveniencing the productive with endless mad regulations, botched operations, over complex taxes, counterproductive wars, road blocking with red lights and islands, gender neutral insurance, transfers to the feckless, government propaganda, vote buying, the barmy aspect of the legal system, all the green tosh, HS2, the Olympics, the EU, loan to the pigis and countless other things.

      The net output of the state sector is therefore surely:

      The benefits of A minus the negative impacts of C (on production in the private and the productive bits of the state sector sector).

      I have no doubt this is a clear net negative. All that is actually needed is Law & Order and Defense and very few other things. On top of that is the huge lost opportunity costs of all these people doing nothing of any real value, who could easily be doing something productive instead.

  4. Andyvan
    Posted December 11, 2013 at 7:34 am | Permalink

    You might as well give up even talking about what the EU should do because we have precisely zero influence in Brussels especially as they could simply point out that the UK government is engaged in massive borrowing, money printing and general squandering of the nations wealth. Zero influence, zero credibility.

  5. Narrow Shoulders
    Posted December 11, 2013 at 8:14 am | Permalink

    Mr Redwood,

    Is there any method of discovering how much of this total figure is wages (including contractors) and how much is consultants? Can the wages be further broken down into the amounts per ten thousand pounds wage band.

    I suspect that these figures, if published, may give the public a real taste for cost savings and cuts in expenditure.

    • margaret brandreth-j
      Posted December 11, 2013 at 2:15 pm | Permalink

      Accounting charges are apparently extremely high!

  6. Bert Young
    Posted December 11, 2013 at 8:52 am | Permalink

    Little point in responding if you ” moderate ” replies from me . Consumer driven economics amounting to huge personal debt is not the way forward . Restraint is the key word added to assistance to the manufacturing /commercial sector .

  7. Brian Tomkinson
    Posted December 11, 2013 at 8:57 am | Permalink

    As you say you told us this three years ago and persuaded me then to give up on your party. The one thing this government has been good at is enlisting the support of the media – particularly the broadcast media and more specifally the BBC – to peddle the myth of austerity meaning cuts in public spending when in fact it was additional taxation and reallocation of spending. Labour colluded with the deceit for their own political reasons but we know that tax, borrow, spend and waste is the shared economic policy of LibLabCon.
    As for the EU, beloved of the LibLabCon leaders and most of their lobby fodder, you may say “any rise is unwelcome” but you are impotent to do anything about it and we could be forgiven for thinking we have dreamt it as the government never mentions it. No doubt their masters in Brussels will be pleased.

  8. Lindsay McDougall
    Posted December 11, 2013 at 3:14 pm | Permalink

    A slightly different aspect of the EU: Malta is now selling passports, which give the right to live in any EU Member State, for €650,000. Not many people can afford that sort of money. However, once the practice has been established as legal under EU law, just watch Malta travel down the demand curve, lowering the price to maximise net revenue. And of course Malta will not be the ultimate destination of these people.

  9. acorn
    Posted December 11, 2013 at 3:43 pm | Permalink

    Now now! We are not confusing “consumption” with “spending” are we? Everybody including the government is getting discounts on all sorts of stuff currently. “Real government consumption remains strong, given the slowdown in nominal spending growth. The latest ONS data indicate that government consumption grew by 1.7 per cent in 2012 in real terms. It continued to hold up over the first half of this year, despite a sharp reduction in nominal government consumption: real spending grew by a cumulative 0.8 per cent in the first three quarters of this year despite a fall in cash spending of 0.7 per cent.”

    Income tax receipts are scheduled to rocket up from £152 billion in 2012/13 to £214 billion in 2018/19, that’s about 6% per year. Yikes!

  10. peter davies
    Posted December 11, 2013 at 4:22 pm | Permalink

    And its more than reasonable to suggest that EU spending falls clearly into the “less desirable” category given the damage they have done coupled with the fact that they have never balanced their books.

  11. Atlas
    Posted December 11, 2013 at 4:43 pm | Permalink

    Hmmm, interesting figures. Given the size of our deficit I am at a loss to understand why interest rates are so low, if as I think you mentioned in a reply to a another comment, John, that the Bank of England has not indulged in Quantitative Easing recently. Perhaps you could give a precis of the real reason?

  12. uanime5
    Posted December 11, 2013 at 6:14 pm | Permalink

    They also argue that employment declines in the public sector will be more than offset by rising private sector employment, and will increase public sector productivity:

    This is occurring because the people who used to do this job in the public sector now do the same job in the private sector. The main difference is that they usually demand a higher salary for doing the same job so the cost to the Government increases.

    • Edward2
      Posted December 11, 2013 at 9:35 pm | Permalink

      Uni
      Care to provide proof for for your ridiculous assertion that all the jobs lost in the public sector have been replicated exactly in the the private sector but with even higher pay?

      • uanime5
        Posted December 12, 2013 at 9:17 pm | Permalink

        Well if the state wants to provide a service they either have to do it in-house or hire someone in the private sector. So if the state has fired 600,000 people in the public sector they’ll need 600,000 people in the private sector to do the job the state employees used to do. As the private sector companies will want to make a profit they’ll almost always charge more than their public sector counterparts.

        • Edward2
          Posted December 13, 2013 at 12:28 pm | Permalink

          That is not proof just your continued ridiculous assertion Uni.

          And it assumes all jobs have to be replaced.
          No possibility the jobs are not required any more or that the job can bee done just as well with less staff.

        • Lindsay McDougall
          Posted December 16, 2013 at 5:44 pm | Permalink

          Is it not the case that many of the jobs lost in the public sector have been highly paid jobs that don’t need to be done, whereas many of the jobs gained in the private sector have been low paid or part time jobs that do need to be done?

          For example, removing a whole tier of resource allocation management in the NHS has been beneficial. The only outstanding issue is how GP budgets are determined. I suspect it can be formula driven, based on demographic profiles and catchment areas.

    • Lifelogic
      Posted December 11, 2013 at 10:34 pm | Permalink

      Some truth in that, the fake shift to the “private” sector. But the state sector, with pensions included,usually pays rather better – 50% more on average.

    • libertarian
      Posted December 12, 2013 at 11:23 am | Permalink

      Uanime5

      Delusional

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    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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