Another five years of rising tax revenues to eliminate the deficit

The Autumn Statement plans for the next five years are very like the 2010 Coalition plans to eliminate the deficit. They rely on modest cash increases in total public spending and large increases in tax revenue, mainly coming from economic growth. The approach so far has succeeded in controlling spending within the totals set out, but tax revenue as we have seen has fallen well short.

The Green Book provides a full five year profile of spending and taxing. It shows public spending continuing to rise in cash terms, by £42.8bn or 5.8% over the period to 2019-20. Revenue is forecast to rise by £140.8 bn or 23% with the big gains coming from Income Tax, VAT and National Insurance.
This enables the government to forecast the end of the deficit by 2019-20, with the current deficit disappearing in 2017-18.

The original plan to bring down the deficit was explained as relying mainly on spending cuts. This was calculated by looking at inherited planned increases in public spending and in real terms. In practical terms the government planned to increase public spending, but to increase tax revenue at a much faster rate, mainly by economic growth, to eliminate the deficit. For the next Parliament the plans assume tight control of public spending, with only modest increases in the cash spending amounts. Once again the main method of cutting the deficit in cash terms is an anticipated substantial increase in tax revenues from economic growth.

There is little leeway in the figures for any new government to spend more without having to borrow more. Hitting the tax forecasts will require a long period of good growth, and setting tax rates that remain internationally competitive. Many of the individual taxes have fallen short of expected receipts over the last four years. The latest forecasts show the impact of lower oil prices on falling oil tax revenues, and assume some increase in revenue from the anti avoidance measures and new corporate taxes set out in this Statement.

The CGT receipts have been well below the peak levels prior to the 2008-9 Crash, illustrating that lower rates raise more revenue. The self assessment and top end income tax receipts have fallen well short, suggesting the 50% rate reduced receipts. VAT has been buoyant, with the higher rate bringing in more revenue as planned and a bit more on top. This government’s experience shows that you have to judge carefully which taxes will bring in more if you raise the rate. The Stamp Duty changes will have a substantial impact on the property market and it will be interesting to see what happens to revenues there.

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75 Comments

  1. Lifelogic
    Posted December 3, 2014 at 4:43 pm | Permalink

    They also rely on yet further increases in tax rates such as the absurd 12% stamp duty. Fiscal drag, capital gains taxes on gains you have not even made after inflation and other stupidities.

    A few sensible tax simplifications I grant you. What is needed is cheap energy, a far smaller state sector and fewer state sector parasites pissing money away (on HS2, green crap, tunnels at Stone Henge and other absurdities). Still no mention of Osborne’s IHT promise of many moons ago or did I miss it perhaps he has forgotten?

    Why one earth should anyone trust him this time? He is just another tax, borrow, rat or you promises and piss it all down the drain merchant.

  2. John E
    Posted December 3, 2014 at 4:45 pm | Permalink

    The stamp duty changes at least make the tax fairer, and lower for most of us. Politically it will help keep some life in the housing market until the election, but there must be a big correction due in the London market that this change will not prevent.

    Like everyone else who I have seen comment I am intrigued to see how the proposed profit on deemed profits made here by multinationals will work. I think it will achieve little other than to give a boost to the accountancy firms – so much cost and complication to achieve little revenue, but we will see.

    This tax and the change in rules for banks reinforce a trend to arbitrary seizure of money by a desperate government that has failed to control its finances. This will obviously harm our wealth long term.

  3. Lifelogic
    Posted December 3, 2014 at 4:49 pm | Permalink

    If he wants some growth perhaps he should bring in some policies such as cheap energy, an efficient smaller state, fewer regulations and some competition in banking. This in order to create some real growth rather than constantly kicking business in the teeth at every turn.

    Oh and taxes on Banks are just taxes on bank customers (so almost everyone) this as banking is so uncompetitive in the UK currently. It may sound good but it is just another tax on voters in essence.

    • Lifelogic
      Posted December 4, 2014 at 7:04 am | Permalink

      A turnover tax (stamp duty) at 12% is totally idiotic, confiscatory and a tax on mobility. It is also a tax almost entirely on London and the South East. To buy a small house or flat in central London you might have to pay perhaps £150K in stamp duty and paid from income already taxed at 40% or 45%. Even a good earner in London on a wage of say £90K average PA might only earn perhaps £2M after taxes and NI over their lifetime. Less if they fall ill.

      If they move say 3 times perhaps for work reasons, they might pay £450K in stamp duty on top then on death they pay another 40% IHT perhaps £800K. Employers are not taxed on paying moving cost for employees too!

      It is a disadvantage to have to pay over £1M for a tiny house in London so why does the government want to make it even worse for them? Then when they die the government steals yet another 40% of the assets off them with IHT say £800K.

      Why not just take all their income and give them an allowance of say £100 per week for food and travel to work! Is this government now in favour of slavery but only for London?

      The loss of the idiotic stamp duty price barriers is however very welcome and long overdue. But why on earth prevent people in expensive houses from moving home, if they move less you do not even get the stamp tax and perhaps CGT off them anyway.

      • Lifelogic
        Posted December 4, 2014 at 7:04 am | Permalink

        I see they still seem to have money to piss away on a pointless Mars mission.

        • alan jutson
          Posted December 4, 2014 at 10:05 am | Permalink

          Lifelogic

          Mars moved production from Slough to Poland I think a few years ago, due to lower cost of production over there.

    • Hope
      Posted December 4, 2014 at 8:28 am | Permalink

      Osborne did nothing to balance the books it was all about party and election. Cameron and Osborne have tread water for nearly five years and the debt has grown and deficit currently growing. The coalition was about changing the Tory party no matter how much it cost the taxpaying public. The OBR also sneeked in the increase in EU contributions over the next 5 years. This is on top of the £1.7 billion extra payment. All borrowed money that WE taxpayers have to pay back. It will take us longer while Cameron and Osbonre literally give it away. A pair of wasters.

    • ferdinand
      Posted December 4, 2014 at 8:53 am | Permalink

      All taxes on businesses are taxes on customers since all costs have to be covered by income.

      • Lifelogic
        Posted December 5, 2014 at 3:39 am | Permalink

        Not always in a competitive market they may end up cutting say top staff pay and keeping prices the same. But banking is not competitive in the UK they get away with murder.

  4. Ian wragg
    Posted December 3, 2014 at 4:58 pm | Permalink

    And in 5 more years when the deficit is still not cleared and the debt stands at over £2 trillion what will be the excuse then. We continue to increase spending by 3% of GDP and this gives the illusion of growth
    The only growth is government spending. By the end of the next Parliament you will have imported another 2.5 million bodies and continue to concrete over England to accommodate them
    When will it all end
    Sorry should be asking Merkel as she’s the real power broker

    • Hope
      Posted December 4, 2014 at 3:49 pm | Permalink

      You are quite correct. Time to vote UKIP there is nothing else on offer to give us our country back. Osborne is now trying to create regions by imposing mayors when the public rejected regionalisation and city mayors. So he has taken the EU route, ignore the public and implement it any way. Time to get him out ASAP.

  5. Edward2
    Posted December 3, 2014 at 5:12 pm | Permalink

    Some time ago on this fine site,I said that my experience of company budgets as a director is that the sales department always overstates their figures and the purchase department always understates their figures.
    Usually by a minimum of 10% on both sides and so it has proved here with our Government.

    I appreciate it is more difficult to make the right decisions as a politician because you have to be popular to survive, so making the tough decisions which in the long term will be right is not easy, in the short term.

    And five years is not long term.

    There needs to be some cuts but they need to come at the top.
    Set an example.
    The fat cats are still in a feeding frenzy.

    • Narrow Shoulders
      Posted December 4, 2014 at 8:17 am | Permalink

      Quite.

      To bring public spending to 35% of GDP as mandated by the OBR is possible. However to do so needs those at the top to be more realitic in their remuneration and pensions.

      The welfare budget can additionally be slashed by removing subsidies through tax credits for companies employing cheap labour. The drop in corporation tax resulting from reduced profits and tax on dividends for the few will be massively offset by the savings.

      Making the UK less attractive to immigrants by doing this will also aave a few quid on infrastructure and support costs. Business will adapt. That’s what it does.

      • A different Simon
        Posted December 4, 2014 at 2:20 pm | Permalink

        Narrow Shadows ,

        I do work for overseas customers .

        I can’t raise my rates because they will just get people from India , Asia or elsewhere .

        The cost of living crisis needs to be tackled from the other direct , in particular reducing the cost of accommodation .

        More of peoples money could circulate usefully in the economy rather than go straight back to the bank as mortgage interest or indirectly as rent .

        There doesn’t seem to be any appetite for this from the Govt .

        • Narrow Shoulders
          Posted December 4, 2014 at 5:55 pm | Permalink

          ADS

          Both my gripes are fuel the cost of living crisis. Support for wages through taxpayer subsidy drives demand so increases prices. Executive pay is a race to the top keeping up with the Joneses thus increasing costs to be borne by the consumer/ taxpayer.

          Fewer bodies and fewer subsidies for housing would drive down costs quickly.

  6. alan jutson
    Posted December 3, 2014 at 5:16 pm | Permalink

    I listened to this speech with great interest.

    I am sure that I heard the Chancellor say that spending would be cut further by all Departments, as savings still had to be found.

    The NHS it was explained was having additional money pumped in.

    You now tell me that expenditure is going to rise, as outlined in the red book.

    Thus if you are right, we have exactly the same double talk from the Chancellor that we have had for the last 4 years.

    Why oh why cannot Politicians be clear about the facts and speak the truth, we are all grown ups after all.

    Not had chance to digest all of the details, but certainly house stamp duty needed to be sorted out on an incremental scale basis, although not so sure of the increased rates (although it will not affect me if the bands are index linked to price rises) is in the best interests of many who live in the South.
    Although certainly better than a so called Mansion Tax.

    Passenger air duty also a sensible change to exclude kiddies from that tax.

    Speech was so upbeat I nearly forgot about the deficit and debt, but then I suppose that was the idea.

    • alan jutson
      Posted December 3, 2014 at 5:17 pm | Permalink

      Mrs Balls in reply just spoke a load of old cobblers.

      How on earth can anyone take this man seriously.

      • Lifelogic
        Posted December 3, 2014 at 7:46 pm | Permalink

        No one does take Balls or Wallace seriously. But then again Cameron is so little better due to his duff compass (supplied one assumes by Ken Clarke and the duff wing).

        It is a shame because, but for his sense of direction on all major issues, Cameron is quite good on his feet.

        • stred
          Posted December 4, 2014 at 10:51 am | Permalink

          Unfortunately, a large chunk of the population ( about 18%) do take Labour claims seriously. They cannot work out that when they criticise the Coalition for not reducing the deficit and then propose to spend even more, while taxing a few wealthy people with a minimal result, the sums don’t add up. In fact this sort of voter often does’t even listen or think about it. They would even vote for Russell Brand.

          • Lifelogic
            Posted December 5, 2014 at 3:43 am | Permalink

            I see “BBC think” Brand (Russell not the equally irritating Jo) is back on Question Time next week with Farage. An endless stream of lefty meaningless drivel from these actors and comedians on the BBC.

      • alan jutson
        Posted December 3, 2014 at 9:38 pm | Permalink

        OOps

        did not plan to put an “s” after Mr in Balls.

    • Lifelogic
      Posted December 3, 2014 at 7:52 pm | Permalink

      Air duty is just more Jam tomorrow, probably after Cameron has left office. Remember the IHT promise, you cannot trust a word they say.

    • Posted December 4, 2014 at 9:04 am | Permalink

      “why cannot Politicians be clear about the facts and speak the truth, we are all grown ups after all.”

      Nope. Senior politicians know very well that less intelligent politicians and most of the public are fooled by the lies they tell. That’s why they don’t speak the truth.

      In addition, it’s not even 100% certain that Osborne and Balls themselves know they’re talking nonsense on the subject of the deficit, as Chris Dillow recently pointed out. I.e. are Osborne and Balls into cock ups or conspiracies? It’s not entirely clear.

  7. ian
    Posted December 3, 2014 at 5:40 pm | Permalink

    As always it left to housing market to do the lifting, I said before that houses price would go up by 50 to 60 per cent by 2019 but with Scotland in the mix now that could well change now because higher interest rates going above 3 per cent, going forward and the pound going down. I see Scotland, EU,PFI, and the new trade deal as big problem for debt interest rates and inflation also loan rates, coupled with the deficit picking up but I could be wrong we will see. If it going happen you should see it by 2016.

    • Lifelogic
      Posted December 3, 2014 at 7:47 pm | Permalink

      House prices have just been clobbered by a 12% stamp duty tax on London.

  8. ChrisS
    Posted December 3, 2014 at 5:58 pm | Permalink

    Once again George Osborne has wrong footed the inept Labour leadership and scored a significant victory today over Miliband and Balls.

    Why was Clegg not there ? Must have been because he resented the acclaim that he knew would come from the stamp duty changes and he must have know that it would hole his and Labour’s Mansion Tax plan below the waterline.

    All we needed to see was a change in the CGT regime : Restoring taper relief and cutting the rate would increase receipts but, again Clegg and the LibDem’s reputation for resenting anything to do with success ensured that, however sensible a change would be, and the certainty that it would increase revenues, they will not support it.

    The Conservatives need to make regular policy announcements from now until May to show what they would do without the dead hands of Clegg and Co holding back necessary and desirable changes.

    • Lifelogic
      Posted December 3, 2014 at 7:49 pm | Permalink

      Indeed they should state what they would do on CGT, IHT and Stamp duty on May 8th in the very unlikely event they win a majority.

    • Mike Wilson
      Posted December 3, 2014 at 11:17 pm | Permalink

      Your faith in The Conservatives is touching – but very odd, given their record.

  9. Brian Tomkinson
    Posted December 3, 2014 at 6:19 pm | Permalink

    This morning you told us that the Coalition came together to cut the deficit, I am pleased that you have now conceded that they had promised to eliminate it.
    Again this morning, you told us that the reason the deficit is still high was because the government “have experienced a shortfall on receipts”. Now you tell us that the new plan for the next five years is very like the old plans which failed. Indeed, you advise us that: “Revenue is forecast to rise by £140.8 bn or 23% with the big gains coming from Income Tax, VAT and National Insurance”. Why should anyone believe a word of this when that is the reason you give for the current failure to balance the books?
    Why is repeating what failed before going to work this time? Isn’t that the definition of madness?
    One of the most irritating aspects of Osborne’s statement was his manipulation of statistics to make it seem that things were better than they really are. He has not halved the deficit as he claimed and I don’t remember him referring to the debt at all; perhaps he had a Miliband moment.
    What happened to all that fine talk from five years ago about how it was totally unacceptable to pile on debt for our children and grandchildren? It’s never mentioned by your party now because, along with so many other things, you have failed to deliver and seem to have only one overriding target which is to keep yourselves in office.

    • Lifelogic
      Posted December 3, 2014 at 7:50 pm | Permalink

      Or a Cameron “we are repaying the debt” moment!

    • Hope
      Posted December 4, 2014 at 8:33 am | Permalink

      Well said, I would not believe a word he says after his performance to date.

    • majorfrustration
      Posted December 4, 2014 at 7:21 pm | Permalink

      Dave ” Let me be clear”

  10. forthurst
    Posted December 3, 2014 at 7:11 pm | Permalink

    “Once again the main method of cutting the deficit in cash terms is an anticipated substantial increase in tax revenues from economic growth.”

    Taking into account yesterday’s exposition of the story so far, one has to wonder whether this is an example of hope over experience. No secular change has been instituted by this government to encourage the economy to perform differently to how it had evolved under the Labour government; the banks have not been fixed, the family silver continues to be sold off and rented back, we are still singlehandedly saving the planet with green crap, wasting money on white elephant money pits, sending Her Majesty’s armed forces to interfere in other people’s business, bankrolling the EU, exporting the brightest and best, who cannot afford to buy homes to start families, by the two hundred thousand per annum and replacing them with twice the number of uncalibrated aliens from the four corners of the Earth. Now, I read that Kensington and Chelsea council in its infinite wisdom has decreed that oligarchs with large quantities of other people’s money to fritter will no longer be allowed to frack there way through the London bedrock to create subterranean palaces that would of necessity call on the services of Polish builders, plumbers etc who might spend some of their earnings here before remitting the balance back home. JR in the past has suggested that servicing the needs of rich foreigners in London is an appropriate way to rebuild our economy which obviously with most of our industry now owned and taxed abroad needs new avenues of taxable growth: are Kensngton and Chelsea on board?

  11. Posted December 3, 2014 at 7:28 pm | Permalink

    To understand why the deficit never goes away, as one might think it should, from simple calculations of money spent and future money received from taxation revenue, we need to look at the problem from a slightly different angle.

    The Government’s deficit is the difference between what it is spending into the economy and what it gets back in taxation. So what can stop it coming back?

    If I save a pound either in a piggy bank or by buying a government bond, which has been issued into the economy by Govt spending, then that pound is cannot be returned to the government in taxation while I’m saving it.

    If I buy an item from China, say on eBay, for a pound, (similarly issued by government) then that pound will never come back to the government in taxation until China decides to become a net importer. That pound will, most likely, end up saved in China’s central bank.

    Therefore we can say:

    Government Deficit = Net Savings of the Private Sector + Net Imports.

    So if the Govt wishes to close its deficit it has to curb the net saving of money, and it has to close the trade gap. Germany has an export surplus, and the above equation shows why that can be translated into not having any Government deficit.

    • Narrow Shoulders
      Posted December 4, 2014 at 1:54 pm | Permalink

      @Peter your post does not take account of annual spendings and receipts becoming aggregate savings and receipts. According to your formula the government must always be in debt to the value of private savings but could run a surplus rather than a deficit. The debt does not need to always get bigger.

      • Posted December 4, 2014 at 7:52 pm | Permalink

        I’m not sure I understand your first sentence but, yes, if the private sector (and indeed the overseas sector) wish to save that means they wish to be lenders. For those who are familiar with book-keeping principles, this means there has to be a borrower (on a pound for pound basis) for every lender and, ultimately, as the custodian and issuer of the currency that has to be government.

        We all ‘know’ that saving is a good thing. I’d just qualify that with the phrase “up to a point” but we do need to recognise the effect that saving, and equally borrowing, has on the economy.

        No, the government’s debt doesn’t need to get bigger. If we all, including those who hold money overseas, go off to spend our savings then it will decrease. Those spendings, and respendings, will become trapped in the government’s very efficient tax collecting net.

      • A different Simon
        Posted December 4, 2014 at 11:41 pm | Permalink

        Narrow Shoulders ,

        “According to your formula the government must always be in debt to the value of private savings”

        That is not what Peter said .

        This is not the case . A sovereign govt can create money debt and interest free .

        • Posted December 5, 2014 at 9:32 am | Permalink

          ““According to your formula the government must always be in debt to the value of private savings”

          It all depends on how “debt” is defined. The monetary base isn’t included in most conventional definitions of debt. That led to the Americans thinking they could mint a trillion dollar coin to get around their recent ‘debt ceiling’ problems. If they had minted 17 of them they could have just about cleared their national debt.

          In an age when all money is fiat, that doesn’t make any sense. If someone has an asset (money) then someone else has to hold the liability. So I would agree with the above quoted remark, except to save that the government’s (or the State’s if you prefer) financial debt, in pound sterling terms, should be considered to be all savings held by all holders of pound sterling.

          Of course government has assets, too, which shouldn’t be overlooked.

    • A different Simon
      Posted December 4, 2014 at 2:27 pm | Permalink

      It can’t curb the net saving of individuals who do not have the capacity to save .

      That is where the banks come in ; debt secured against their bubble valuation houses , Wonga , doorstep sharks etc .

      Let them eat credit .

    • libertarian
      Posted December 4, 2014 at 2:46 pm | Permalink

      Petermartin2001

      I see you still haven’t found out how money works.

      Your post is total nonsense.

      You still believe that money is a zero sum fixed amount. It isn’t its a fiat currency that we operate with fractional reserve banking.

      Tell you what, it explains it all on the Bank of England website, What is money section. Please read it

      • Posted December 4, 2014 at 7:31 pm | Permalink

        Libertarian,
        Do you mean the article: “Money creation in the modern
        economy” Michael McLeay, Amar Radia and Ryland Thomas (BoE Monetary Analysis Directorate) ?

        They say “Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’
        central bank money to create new loans and deposits.”

        I’m in total agreement with all of that. I’d just make the point that money issued by banks isn’t a liability of government. To pay our taxes we need to use money which is. That’s something we don’t usually need to be concerned with ourselves. Providing our bank is solvent that all happens via the clearing process and we don’t need to know about the difference. Unless we are interested in economics, that is!

      • stred
        Posted December 5, 2014 at 10:17 am | Permalink

        I idle my time away listening to the tele while repairing my properties. Yesterday, theer was a programme from Parliament in which I learned something new during a debate about the uncrupulous behaviour of some banks over mis-selling interest rate swaps and the handling of SMEs property after they had been mugged. The MPs did a greaat job, but it emerged that the law, as written, allows both the banks and their regulator to ignore Parliament.

        The subject which was most interesting was that the balance sheet or worth of these taxpayer backed banks includes the security offered by the owners of the SMEs obtained before their enterprises were (called for loan security? ed). In other words the homes and family belongings, savings, pensions etc of these entrepreneurs are being added to the balance sheets of the banks, in return for the bank creating fiat money in the first place.

        What do you two monetary experts and JR think of this?

    • Denis Cooper
      Posted December 4, 2014 at 4:15 pm | Permalink

      I think I’ll keep out of this, having other things to do …

  12. Iain Gill
    Posted December 3, 2014 at 8:08 pm | Permalink

    George Osborne looks and sounds like one of our grad trainees, equally lacking in real world experience, full of presentational bluster.

    Shame really I knows lots of people personally who could do a better job, our political system really does a substandard job of getting the people we need into key jobs.

  13. William Gruff
    Posted December 3, 2014 at 8:28 pm | Permalink

    The Autumn Statement plans for the next five years are very like the 2010 Coalition plans to eliminate the deficit.

    Those 2010 plans again. Will they be recycled, once again, in 2018, then again in 2023 and so on, every five years until those who will have to pay the crippling interest on the debt the deficit feeds finally decide that politics is far too dangerous to be left in the hands of politicians?

  14. Colin Hart
    Posted December 3, 2014 at 8:32 pm | Permalink

    There is no certainty of rising tax revenues. The only sure way you reduce a deficit is to reduce spending.

    I spent ten years as a district and county councillor. In almost every one of those years we reduced expenditure without impairing services.

    It seems central government is incapable of this; probably because they equate how much you spend with how good a service you are delivering. At least that is what the public tend to believe and we do not have politicians with either the leadership or communication skills to disabuse them.

    • A different Simon
      Posted December 4, 2014 at 10:06 am | Permalink

      Colin Hart ,

      The finances of a county council , private individual , company are fundamentally different from the finances of a country and it’s sovereign Govt .

      I applaud you for spending money responsibly and accept Central Govt has a long way to go in this respect .

      Did the reduction in overall expenditure translate into a reduced grant from central govt or lower council tax ?

      Whilst a deficit is bad for an individual , company or council it is the norm for sovereign governments which can issue fiat currency money debt and interest free .

      If the Govt endeavours to take more money out of the economy than it has spent into existence , where is the difference going to come from other than peoples savings ?

      How could this trick ever be performed indefinitely when money leaks away due to imports and flight of capital in a global economy ?

      • Denis Cooper
        Posted December 4, 2014 at 4:42 pm | Permalink

        The current theory to justify government profligacy, that it has to do it.

  15. Bazman
    Posted December 3, 2014 at 8:48 pm | Permalink

    Rising tax revenues, cuts and tax rises for the majority of the population expansion of the economy and tax cuts benefiting the few and relying on the defunct trickle down effect. Rule by the rich for the rich is imposed cheating the poor, poorly paid and even middle earners of cash services they deserve. My tax credits have been cut cheating me of £80 a month just for a start. Has all the tax cuts for the wealthy put this back into the economy? More than likely used to bankroll the Tories along with the contributions from Russians. Russia slipped three places to rank a dismal 136th out of 175 countries in Transparency International’s annual latest corruption survey, unveiled Wednesday. No surprise there,at least not for me. It tells of corrupt officials fleeing Russia with their gains to where? London of course to be laundered by the City. Truth hurt I know. Censor that one John. Election soon.
    We know where to he money comes from and where loyalties lie. 160k for tennis with Dave? Maybe someone is going to tell us about the pennies paid by workers vie their unions to the labour party in the hope of a better life? Good luck with that one.

    Reply No political party can accept donations from foreign sources.

    • libertarian
      Posted December 4, 2014 at 2:52 pm | Permalink

      Oi Bazman

      If its all so easy here’s an idea, why not start your own business, pay top dollar to your workers and 80% tax. Go on, or are you like most socialists (words left out ed) just want to live off the back of other peoples hard work.

      Oh and exactly why were you taking taxpayers money in tax credits when you told me a while back you were earning £30k pa in your scrap metal job in Cambridge.

      • Bazman
        Posted December 4, 2014 at 7:10 pm | Permalink

        Bleating baseless business nonsense. The tax tax credit threshold have been cut, for average and below average earners but are still very much funding low paying companies profits. Maybe they should be cut further to incentivise the poor. Socialism for the rich vie tax cuts and vat rises as well as corporate welfare continues pretty much unabated. What hardships have the wealth faced. I said Hardships. BMW instead of Bentley? Only four holidays this year. Jealousy? You will have to do better than childish nonsense like that.

        • stred
          Posted December 5, 2014 at 10:24 am | Permalink

          I’m a below average earner and have never been offered a tax credit. How many children, dogs and wall size teles do I need to start?

    • Bazman
      Posted December 4, 2014 at 7:01 pm | Permalink

      No directly, but via the back door is OK as you well know John. Lunch with Dave. tennis with Dave and so on. The Tories are funded by a few hundred millionaires and there is no escaping this fact.

  16. Posted December 3, 2014 at 9:10 pm | Permalink

    Sorry for being dim but the BBC reported this today (Wednesday 3rd):

    In its report accompanying the Autumn Statement, [the OBR] projected that spending by central government on public services was going to fall from 21.2% of gross domestic product (GDP) in 2009-10 to 12.6% in 2019-20.

    My question is, if public spending is 21.2% of GDP and we are paying taxes totalling well over 30% (that’s with everything, such as income tax, VAT, excise duties, national insurance etc etc), where is the rest of the money going?

    In a nutshell the public seem to be paying a lot more in than is coming back out.

    Can anyone explain this?

    Reply Public service expenditure does not include welfare and other transfers!

    • William Gruff
      Posted December 4, 2014 at 5:13 pm | Permalink

      Reply to Reply:

      Purely out of interest, does it include the cost of servicing the national debt?

    • Lifelogic
      Posted December 4, 2014 at 6:50 pm | Permalink

      The 21% is largely the cost of the governments administration the additional (circa 26% is paid back to the public. Mainly to encourage fecklessness or buy votes.

  17. Kenneth R Moore
    Posted December 3, 2014 at 10:56 pm | Permalink

    Meanwhile the national debt continues to increase by £3000 per second.

    But don’t worry, Mr Redwood informs us of the governments cunning plan.
    After the next election tax revenues are going to boom and reduce the deficit as the borders are kept open to increase the number of jobs and keep economic growth high. All those hard working migrants doing the jobs the natives won’t dirty their hands with blah blah blah..
    But hang on a minute..that plan has already been tried and it doesn’t work!!!

  18. Mike Wilson
    Posted December 3, 2014 at 11:22 pm | Permalink

    If, in rough numbers the Tories have added £400 billion to the national debt since 2010 – and the BOE created £375 billion out of thin air and used it to buy government debt in the secondary market … is it true to say the government is paying interest on most of the debt it took on (as opposed to Labour’s earlier debt) to the Bank of England?

    When the bonds mature – will the government redeem the bonds by paying the Bank of England? What guarantee do we have the money paid to the BOE when the bonds are redeemed will be used to destroy the money created out of thin air? Could the BOE just write it off and say to the government ‘you keep the money – it’s only made up money after all’?

    • stred
      Posted December 4, 2014 at 11:11 am | Permalink

      Perhaps the Treasury could tell the BoE to put the bond recepts into an electronic vault and forget about it. Providing they can also ensure that the banks don’t let the reserves that they are putting away escape into the private sector and cause high inflation, then HMG can keep on doing the same forever, pay its bills, salaries, public sector pensions and for useless expensive infrastucture. They will be supported by the CBI and big business, who will approve and lobby, because the more expensive the waste, the larger the slice of the goverment cake will be on their plate.

    • Denis Cooper
      Posted December 4, 2014 at 4:37 pm | Permalink

      “… is it true to say the government is paying interest on most of the debt it took on (as opposed to Labour’s earlier debt) to the Bank of England?”

      The Treasury is paying the promised interest in the normal way on all of the gilts owned by the Bank, or more accurately by the Bank’s wholly owned subsidiary which actually did the buying using new money loaned to it by the Bank.

      However as the Treasury owns the Bank and is entitled to all of its profits the interest can effectively be recycled to the Treasury, and in fact the Treasury has already taken at least one chunk of the cash that the Bank was holding, at least some of which it will eventually need back.

      “When the bonds mature – will the government redeem the bonds by paying the Bank of England? What guarantee do we have the money paid to the BOE when the bonds are redeemed will be used to destroy the money created out of thin air? Could the BOE just write it off and say to the government ‘you keep the money – it’s only made up money after all’?”

      The Treasury has already redeemed some gilts that matured, and the Bank has used most of that money to buy other gilts to maintain its stock. There is also in theory the option of the Bank selling gilts back to private investors, but as that could only be done when the market could stand having that extra volume of gilts dumped into it that is unlikely to happen soon in any quantity, and it may never happen except in a small way.

      As repeatedly pointed out, if the Bank’s subsidiary doesn’t get back enough money to repay its loan from the Bank then it will go bust, and that loan which appears as by far the largest asset of the Bank’s balance sheet would no longer be sufficient to match the equally large liability of the new money issued to fund the loan and the Bank itself would go bust.

  19. matthu
    Posted December 4, 2014 at 6:30 am | Permalink

    Public spending to fall to 35.2pc of GDP and the public sector to have lost almost 20pc of its total staff by 2020? The deficit as a proportion of GDP to show a turnaround of 11.2pc of GDP?

    The government has not shown itself capable of meeting promises of this magnitude at any time in living memory – and the next government certainly won’t. (Even more so if they are distracted by the prospect of an EU referendum.)

    So simply not credible.

    • A different Simon
      Posted December 4, 2014 at 10:11 am | Permalink

      Can you imagine what a disaster it would be if the Govt aimed to run a deficit or balanced budget in a country with a negative balance of payments and money being transferred from the masses to the few ?

      How long could they go on doing that until peoples savings were exhausted ?

      I’m relieved that they will never achieve it .

      Really do hope that the current rubbish coming out is due to us being in silly season approaching May 2015 .

  20. Mike Stallard
    Posted December 4, 2014 at 7:06 am | Permalink

    I think people will look back on this decade as the one where we lost control of both immigration and the debt. The 1930s was the decade when we humans lost control of Europe. The 1910s were the decade when we Europeans lost control of the world.
    Humanity survived in all cases, but at what cost?

    • William Gruff
      Posted December 4, 2014 at 5:17 pm | Permalink

      Humanity survived in all cases, but at what cost?

      Slavery.

  21. Roy Grainger
    Posted December 4, 2014 at 8:42 am | Permalink

    The stamp duty changes are logical and long overdue but as you say it will be interesting to see their effect. I would expect an average rise in price for properties under £1 million firstly because properties will be priced into the previous “black holes” (so lots of properties priced at £499k now get priced at £510k) and secondly because sellers will (on average) raise prices to account for the fact that buyers have extra money available from their stamp duty saving.

    • A different Simon
      Posted December 4, 2014 at 1:53 pm | Permalink

      Roy Grainger ,

      I’m a supporter of nominal transaction taxes to discourage high frequency trading of securities but opposed to non-nominal transaction taxes such as stamp duty .

      The upshot seems to be that the money which used to get recycled into society will get appropriated by the mortgage lenders and that higher prices will lead to an increase in aggregate household debt .

      This will surely only make the correction worse when house prices return to long term norms . Eventually politicians are going to find themselves pushing on a piece of string to keep house prices high and rising .

      A proper location value tax levied once a year on all houses and undeveloped plots would be much less damaging than stamp duty and could be used to reduce employment taxes – and provide negative feedback into house prices .

      London is certainly not part of England anymore and historically much of it probably never was (not just embassys) so maybe there is a case for different rules there aimed at maximising revenues from super rich foreigners .

      • Denis Cooper
        Posted December 4, 2014 at 4:19 pm | Permalink

        I’m really not that bothered by the frequency with which other people buy and sell things, unless I want to sell something myself and find that there is no liquid market for it, which can be a pain.

  22. David L
    Posted December 4, 2014 at 9:05 am | Permalink

    Having tried to take in the thoughts of various economic commentators in the media regarding the Autumn Statement, I am left with the sinking feeling that the disabled people I help care for are going to have their lives even more restricted in the interests of balancing the books. All around this area there is evidence of continuing affluence but those who are disadvantaged remain hidden. It’s all very well for many respondents to call for massive cuts in public spending, but maybe they don’t see the consequences close up. I judge a society by how it treats it’s most vulnerable…

    Reply I wish to see generous treatment for the disabled. There will be no overall cut in cash spending, it will continue to go up.

  23. Andyvan
    Posted December 4, 2014 at 9:06 am | Permalink

    This government has given us a catastrophic failure of economic policy that leaves us with almost the highest deficit and public debt in the world. Even the French are pointing out how unsustainable Britains spending is. We have a massive, unproductive and incredibly wasteful public sector, an oppressive security state, ridiculous levels of taxation, weak and badly thought out foreign policy, no gold reserves to speak of and are facing bankruptcy as soon as enough people see the writing on the wall.
    Add to that a political class so inept, out of touch and talentless they can only worry about the next election not the good of the country and we have the makings of a disaster. When it happens there is just the chance that people will see how the whole mess is caused by central planning and regulation. On the other hand if could go the way of most economicly ruined countries and give us a tin pot dictator that is even worse.

  24. stred
    Posted December 4, 2014 at 11:31 am | Permalink

    Oz seemed pleased that the new accounting method for measuring GDP had also revealed that business investment had also been better than previously thought as well as improving GDP. He did not mention that the new figures now have to include drug dealing, horizontal sex working and charities but, if these industries are now so important that they result in bills for billions from the EU, how on Earth do the civil servants calculate them.

    It may be relatively easy to count all the defunct business businesses in every High Street that have been converted to charity shops or even count VAT , Income Tax and NI returns from their offices. But how do they do the same for the other two? Do these industries declare all their income and what happens when the operators are the same, paying their workers with drugs and drug money? Have the statisticians assumed that because there is an assumed figure for turnover in sex working there will be a corresponding figure for investment in sex workshops?

    He also did not mention that, unfortunately, the sudden increase in growth will not result in an increase next year, as the same method will be used again and our trusted statisticians will be out there now trying their best to measure the improvement.

    • stred
      Posted December 4, 2014 at 11:35 am | Permalink

      Omit one business please.

      • stred
        Posted December 4, 2014 at 5:02 pm | Permalink

        Oh dear. Omit 2 ‘nows’and an ‘also’ too. Why can’t people like me see mistakes on the first reading but they are obvious when read an hour or two late?

  25. CHRISTOPHER HOUSTON
    Posted December 4, 2014 at 2:13 pm | Permalink

    For the very first time I recollect I agree with Ed Balls; in point, when he said The Chancellor’s measures/statement is pure fantasy.

    Growth in the UK economy providing more tax receipts and a decrease in the deficit? I feel sure our exports to Europe are based on the desire and strikingly the ability of Europeans to buy British goods ongoing. With Euroland in the doldrums and Pound Sterling being relatively high to the Euro no doubt justifiably how on earth can one speak of future GROWTH in the UK economy? Europe aside, does the UK plan selling its expensive goods to Russia, the 8th largest economy? Answer no. Not so much as a wedge of Cheddar. To China when her President forecasts “sluggishness” in its own and the world economy? Perhaps to Latin America with its brightest star Brazil in economic meltdown?

    Perhaps the hot houses of Lincolnshire, Wiltshire, Kent and rural areas in general can employ cheapo European labour and grow breadfruit destined for an African market. But aren’t the Chinese opening industrial enterprise after food production facilities in Africa?

    • stred
      Posted December 4, 2014 at 5:06 pm | Permalink

      We could develop the newly measured areas for GDP in London and put the goods in shop windows, Dutch style or have legalised premises like other EU countries.

  26. iaqn
    Posted December 4, 2014 at 5:22 pm | Permalink

    AS I said before, death by a thousand cuts, for years and to come. Never waste a good crisis.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. 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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