Debt and deficit

These two simple ideas still seem to cause trouble for some politicians and political commentators. Let’s have another go at explaining where we are.

The UK has a large state debt. This is the accumulated borrowings taken out by successive governments to spend more than they collected in taxes over many years. These borrowings do not suddenly have to be repaid. They are regularly refinanced or rolled over, as bonds issued become due for repayment. The UK tends to have longer term borrowings than many other countries, and can currently borrow very long at low interest rates.

The rate of increase in these borrowings has been very fast in the last two Parliaments. Labour doubled the debt, and the Coalition has increased it by around 50%. This is a matter of concern. Whilst so far it has been easy to raise the money, the amount it costs to pay the interest on the debt builds up to unacceptable levels if a state simply carries on borrowing at an excessive rate. This government has benefited from interest rates going lower and staying lower for longer, but even so, the interest costs are rising. Most people in the debate – including Labour – believe there has to be some limit on the rise in interest costs. One day interest rates will go up again, and then the progressive impact on the public finances will be uncomfortable as new debt is issued at ever higher rates.

The deficit is the annual increase in the amount borrowed. It is the amount of extra spending being undertaken each year which we cannot afford out of tax revenues. State borrowing is deferred taxation. Every year a government borrows it is saying to current taxpayers we will let you enjoy higher public spending than you are paying for. However, those same taxpayers and their children will have to pay the interest on the borrowings on top of regular spending in future years, and may at some point have to pay off some of the debt.

All the main parties in the election now accept the need to reduce the deficit. Labour says we only need to eliminate the deficit for current spending, and can carry on borrowing lesser amounts for investment or capital spending. The Conservatives say the whole deficit has to be eliminated in view of the debt mountain already incurred.

To do either of these feats requires a lower level of public spending and or higher tax revenues. Conservatives say that cutting public spending by 1% a year for the next three years will do the job. There is no need for tax rises. As the economy grows so more revenue comes in. Labour so far has not specified how much it wishes to achieve by tax rises, and how much by spending cuts.

This Parliament the deficit has been brought down by one third in cash terms or one half as a proportion of the economy, by moderating the rate of growth of public spending and by the VAT rise. Other tax rises like the CGT increase and the 50p Income Tax rate actually lost the Treasury revenue. This experience shows there will be no return to the 1930s, no hacking away at the NHS or other crucial services, to achieve the elimination of the deficit.


2008-9 £102.6bn
2009-10 £162.7bn
2010-11 £143.1BN
2011-12 £123.7bn
2012-13 £125,8bn
2013-14 £102.3bn

Current level of state debt (excluding pension liabilities) £1.5 trillion.


  1. petermartin2001
    January 15, 2015

    All the main parties in the election now accept the need to reduce the deficit.

    All the main parties would be right to accept that need if inflation were the number one priority. Creating and spending too much money creates too much inflation. We can all agree on that. But, if deflation is of concern then money creation, by the same token, can nullify that deflation.

    The burdening future generations argument is overdone. Just as we enjoy the goods and services that we produce in our economy, so will they. They can’t send anything back in time to repay for our so-called excesses.

    The £ sterling is the monopoly of the UK government. It can never run out of money! It can never default on any loan denominated in its own currency. The only economic considerations have to be inflation on the one hand and recession/unemployment on the other.

    1. Ted Monbiot
      January 15, 2015

      Increasing the money supply if it were to be spent by the private sector won’t increase Government debt though, will it Peter.
      So allowing more credit into the economy through the major Banks for the private sector to invest and expand could be good for the economy and reduce the chances of deflation.
      The problem with the deficit is simply the fault of a Government that will not control its annual budgets, using the printing press to buy popularity and votes.
      They could still get their annual deficit down without causing “austerity”.

      1. Ralph Musgrave
        January 16, 2015

        “The problem with the deficit is simply the fault of a Government that will not control its annual budgets, using the printing press to buy popularity and votes.” Well, IF THAT is the cause of the deficit, then obviously the deficit is unjustified. But a large majority of economists agree that at least SOME OF the deficit (and perhaps all of it) is needed so as to avoid austerity.

        1. Ted Mombiot
          January 16, 2015

          I’m not so sure that the deficit is the reason the economy is growing again.
          Government spending is now double what it was back in the 1990’s and we had good growth back in those days.
          Perhaps if the Government left citizens and businesses with more of their gross earnings then the economy might grow more.

    2. David Murfin
      January 15, 2015

      “It can never run out of money!”
      Then let us all cease working and rely on the government printing enough money to keep us in the style to which we have become accustomed.

      1. Ralph Musgrave
        January 16, 2015

        Very silly trite comment.

        1. Paul
          January 16, 2015

          Such comments wouldn’t be necessary if there wasn’t the endless attempts by the left to claim the deficit doesn’t matter, it can be increased without any concern, that austerity is unnecessary etc etc etc. Or continually using misleading terms such as borrowing as a proportion of GDP (the purpose of which is to hide boom borrowing in boom GDP)

          All this is just an excuse to borrow/print more money now for electoral reasons, putting off the costs onto a future government.

    3. alan jutson
      January 15, 2015


      So if I read you correctly, your answer is to print more and more money ?.

      I do not think so, many Countries have tried this in the past and it eventually just trashes the value of the currency, and robs people of their savings and pensions.

    4. Max Dunbar
      January 15, 2015

      Germany didn’t run out of money in 1923 either. It wiped out the savings of millions of people though.

    5. Denis Cooper
      January 15, 2015

      Well, as we import much of the stuff that we consume one factor which affects consumer prices is the external value of sterling against other currencies; and while in theory the UK government may always be able to arrange for more pounds to be created, so that it need never run out of them to pay its bills, if it goes too far with that then it – and indeed the rest of us – may run out of people who are prepared to accept payment in pounds where they have a choice.

      1. petermartin2001
        January 16, 2015


        I’d argue against pegging the exchange rate to anything else. Even, if inflation is low and stable there could still some be variations in the value of the £. But these are necessary from time to time. The general experience, both in the UK (IMF debacle, Black Wednesday etc) , and elsewhere is that fighting against the market is generally expensive and counterproductive.

        Countries which let their currencies freely float , like Iceland, generally recover better from economic shocks than those who don’t. No examples needed.

        So that still leaves only two danger indicators for government. Inflation and Recession. Government has to steer a sensible path between them.

        1. Denis Cooper
          January 17, 2015

          Yes, but as I say one factor which comes into domestic inflation is the external value of the currency, which will trend towards zero if the government goes over the top in arranging to have more and more of it in circulation; and then potentially there is also not just the problem of increased prices for our imports but a refusal by the rest of the world to continue supplying us with imports unless we pay in the currency of some other country.

    6. A different Simon
      January 15, 2015

      John you say “This is the accumulated borrowings taken out by successive governments to spend more than they collected in taxes over many years. ”

      We do not have capital controls and even within the country money trickles up quickly from the masses to the rich .

      The super-rich pay proportionally very little of their money back to the society it came from .

      Under these circumstances isn’t it inevitable that the economy will leak money ?

      Thus if a govt attempts to fund public services from taxation it will starve the real economy of it’s life blood which in turn will cause taxes to go down .

      Looks like the problem here has very little to do with Govt spending (except on items from abroad) and would not go away even if the Govt stopped spending and stopped taxing .

    7. Ralph Musgrave
      January 15, 2015

      Good summary. I’d just add a third “economic consideration”, namely that the interest on the debt should never stray very far from zero. And a country which issues its own currency has complete control over the rate of interest it pays on its debt (as numerous advocates of Modern Monetary Theory have pointed out).

      I.e. if the debt shoots up to Japanese levels, who cares as long as the real or “inflation adjusted” rate is negative?

    8. Stephen Berry
      January 15, 2015

      That the UK can never run out of £ Sterling is a comforting thought, Peter. I will sleep better tonight.

      But is it the whole story? The British government could end up paying its debt in a worthless currency and that would surely cause consternation amongst investors. In those circumstances, the investors might well want the British government to peg the pound Sterling to gold or a more reliable currency like the Swiss Franc. So you might add to your, “The only economic considerations have to be inflation on the one hand and recession/unemployment on the other”- the future value of Sterling.

      It would be a tremendous boon for mankind if there were a tight limit on the amount of debt governments around the world could issue. Of course, as an ethical investor, I never purchase government stock.

      1. petermartin2001
        January 16, 2015

        “The British government could end up paying its debt in a worthless currency”

        It cannot possibly be worthless if inflation is under control. Remember I said we have to avoid high inflation on one hand and recession on the other. That’s what inflation control means – reducing the tendency of a currency to devalue over time.

        I wish I could suggest a way for a currency to remain stable in value, or even increase in value over time, but I’m afraid that’s not possible, or at least not in a growing economy. Or if it is, no-one has discovered how to do it yet.

        1. APL
          January 17, 2015

          Peter Martin: “It cannot possibly be worthless if inflation is under control. ”

          Ha ha! Since 1914 the £ sterling has lost 98% of it’s value. By 1914 standards sterling is already worthless.

          From here it is but a short stretch to pre Euro Italian lira valuations, since most of the ‘heavy lifting’ of destroying the value of the currency has already been accomplished.

          1. petermartin2001
            January 18, 2015

            So which would you prefer, 1914 £ sterling values and 1914 living standards or 2015 £ sterling values and 2015 living standards?

            It’s a no-brainer. Having said that, we do need to recognise past mistakes and acknowledge that inflation was allowed to get out of hand in the 70’s. That lead to the abandonment of the goal of ‘full employment’. There was no need for that. But there was a need to rethink what ‘full employment’ meant.

            The Conservative government won the election on a slogan of “Britain isn’t working”. Unemployment was 5% on the old scale. That corresponds to about 3% on the new scale after all the changes in rules. That was actually pretty good.

            The problem IMO, was partly that the governments of the 60’s and 70’s tried to achieve an unemployment level of 2% on the old scale. That now looks much too ambitious and its really not surprising there were problems of high inflation.

          2. APL
            January 18, 2015

            “destroying the value of the currency”


            To buy the save value of £1 goods at 1913 (sterling valuation), today you’d need £100.68

            The bank of England proudly boasting that inflation has averaged just shy of 5% a year ( average 4.7%).

            Which as it is a government figure, you can pretty well bet you worthless 2014 £ sterling that the figure is an under estimate.

          3. petermartin2001
            January 18, 2015

            You’ve got to ask yourself just what Govt are, are should be, trying to achieve economically. Are they trying to primarily preserve the value of the currency? Or should they primarily be trying to grow the economy? Most would say the latter.

            The economic evidence is that countries who allow their inflation rates to get out of hand, say exceed double figures also don’t have good economic growth. On the other hand a 2%-5% inflation level gives better growth than 0% or less (deflation).

            So, from observation, we can say as a scientific truth that the optimum level of inflation must be in this region. Governments usually aim for 2% I suspect they may well do better, in terms of economic growth, if they aimed for a slightly higher figure.

          4. APL
            January 18, 2015

            petermartin2001: “So which would you prefer, ..”

            Which is a transparent attempt to present a false dilemma.

            What you are attempting to assert is that you must first make people poorer ( by devaluing the currency their wealth is stored in ) in order to make them wealthier.

            Then because a citizen has to pay £100,000 for a house instead of £1000, you claim that he is richer for it.

            Nonsense of course.

          5. APL
            January 19, 2015

            petermartin2001: “On the other hand a 2%-5% inflation level gives better growth … ”

            I regret to say, I think that is utter nonsense.

            If you are inflating the economy, by 5% a year – that does not mean the economy is growing. It means the ‘yardstick’ you are using to measure growth is shrinking.

            There may be some growth too, but that is despite the governments attempts to pretend there is growth.

            petermartin2001: “than 0% or less (deflation).”

            If you had gentle deflation – 1 – 2 % a year, you would probably encourage real growth, because items in the economy would gradually become cheaper, in terms of sterling already accrued ( capital ) and a business can buy more and invest for a better return.

            It’s about time the old saw that inflation leads to growth in the economy was comprehensively debunked for the nonsense it patently is.

    9. REPay
      January 15, 2015

      What about the cost of goods and services such as energy which we are likely to be importing in ever greater amounts? (Although I grant other major currencies are being debased by profligate governments – e.g. the euro.) If a government were to follow your suggestions, with ever more money being printed, the “pound in your pocket” will be hit and that will be very serious for those people with very few pounds. Those of us who have saved for our retirement and don’t enjoy tax payer funded index linked pensions will also be hit.

      1. REPay
        January 15, 2015

        “They can’t send anything back in time to repay for our so-called excesses.”

        No, but we can send them the bill for our excesses…

        1. petermartin2001
          January 18, 2015

          OK but to whom do the future generations repay it? If the recipients are in the UK they are repaying it to themselves. If they are concerned that some citizens are being paid too much for doing nothing, they can address that problem via their taxation laws.

          If the recipients are overseas they be paid in £. What can they do with them? They’ll either spend them or save them Or they’ll swap them for another currency and those who end up with the £ will either save them or spend them.

          That can only increase the UK export performance! Isn’t that supposed to be a good thing?

    10. JoeSoap
      January 15, 2015

      No it can never run out of its own money. But it can steal from today’s savers to hand the money to today’s spenders, and that is precisely what it’s doing. It’s a wealth tax by any other name. All of this brought to you by a Conservative (as the main part of a Coalition) government. If Cameron gets back in May nothing will change. The way to protect savers is to have a balanced budget, a strong currency and flexible labour market. Ask the Swiss about the first two. They should have instigated the third instead of some barmy currency pegging scheme with the Euro which has now come undone. I wonder what Nick Clegg, Ken Clarke et al will have to say about that?

    11. Mark
      January 15, 2015

      While a government with its own currency may be in a position to avoid technical default on debt denominated in that currency, mismanagement will eventually lead to a diminished capacity to borrow in real terms, and even to secure services and spend – that is exactly what happens under hyperinflation. The real economy is instead conducted with far lower efficiency via barter, which also tends to bypass taxes.

    12. APL
      January 15, 2015

      JR: “Labour doubled the debt, and the Coalition has increased it by around 50%.”

      petermartin2001: “The burdening future generations argument is overdone.”

      I don’t think so.

      petermartin2001: “Just as we enjoy the goods and services that we produce in our economy, so will they.”

      How much of government spending is earmarked to pay civil service/local authority / government Quango pensions.

    13. Jon
      January 15, 2015

      The point is not that the young can’t send money back in time, it’s that they will pay heavily every year for the rest of their lives to service the debt that was built up. I think you know that but are trying to find ways of not accepting it.

      Policy advisers have more recently started to talk about there not being a State pension but replacing it with compulsion. Interesting that in a recent survey around 25% of the young don’t believe they will get a State pension when it’s their turn. I was impressed with that, it showed a level of awareness of the young that I wouldn’t have expected. Can’t remember which survey, possibly PPI issue 72 but quite possibly not without checking.

      They pay extra for university and will pay a lot more generally. My back of an envelope estimate was that during their working lives they would pay north of £75,000 in today’s terms each to service the debt of previous generations that they didn’t have to.

      An encouraging upside is that they have a different attitude to us older folk. They don’t look to the State in anything like the same way as the older generation do, they have a far more independent outlook (generally speaking from surveys). The young are not joining the collective unions as used to be the case and are not the ones supporting strikes in the same proportion. I think it bodes well in say 15 to 20 years time when they are heavily influencing policy.

    14. Jagman84
      January 15, 2015

      I always regard the currency of a sovereign nation as its “shares”. If you issue more “shares” (via QE), you simply lower the value of both the new and existing shares. You need to grow the business to restore the value.
      Incidentally, Mr Redwood, was the large jump in 2009-10 due to the raising of the top rate of income tax or due to external influences.

      1. petermartin2001
        January 18, 2015

        The £ is not a share in the UK. Anymore than a $ is a share in the USA.

        It’s essentially a tax credit or a tax voucher. The Government levies its taxes in £ and insists they are paid in £. When the Govt collect the vouchers they destroy them. When they spend they issue new ones. They can never destroy more than they issue overall. Its simply not possible!

    15. William Gruff
      January 15, 2015


      … Just as we enjoy the goods and services that we produce in our economy, so will they …

      It’s all a matter of opinion, however, it’s my opinion that were we not overburdened by taxation, and the various fines, charges, fees, tolls and other exactions authority makes, with the threat of force , we might have rather more money with which to enjoy rather more goods and services and so be rather better off, healthier, happier and more financially secure.

      It is also my opinion, thanks to my parents, that if one is in debt one’s money, and thus one’s labour and skill and commitment and dedication and other qualities and time and autonomy, is one’s creditors’, which makes one effectively a slave. I would never deny anyone the right to spend or sell himself into slavery, however, as a father and grandfather, I would deny him the right to condemn my descendants to effective slavery simply so that he may live a little easier now. No government has the right to spend beyond its means, nor to inflate itself out of debts only the governed can pay with a currency that grows ever worthless.

      If you think remembrance and reiteration of the duty we owe to those yet unborn is ‘overdone’ you may feel that living within one’s means and taking pride in a sheaf of bank statements without a trace of red ink, a mortgage and bills paid on time and a card application refusal because one has no ‘credit history’ (recte: No record of debt repaid as agreed. ) ‘unsophisticated’ and rather bourgeois, in which case I’d say that you are part of the problem rather than any source of remedy. That you have written:

      It can never run out of money! It can never default on any loan denominated in its own currency. The only economic considerations have to be inflation on the one hand and recession/unemployment on the other.

      confirms my suspicion.

      You are a merchant banker and I claim my free Kolley Kibber.

      1. stred
        January 16, 2015

        PFIs were also not included in the debt. Hire Purchase for the NHS, defence and schools, all to be paid through taxation. Gordon Brown started the rot and the occupants of no 10 and 11 decided to carry on. Now our taxes are spent on this instead of essential medication and soldiers.

    16. Mondeo Man
      January 15, 2015

      Our government can never run out of money – but that money can be so worthless as to be unfit to buy anything with.

      So the answer to ever upward prosperity was staring us in the face all the time. Set the printing presses to full power and throw open the borders.

      Why did we ever bother with good financial management and border security ?

  2. Lifelogic
    January 15, 2015

    “As the economy grows so more revenue comes in” but will the economy grow much given the excessive tax rates, OTT regulations, expensive energy, restrictive planning, bloated inefficient state sector, anti business government and the absurdly complex tax system?

    “Other tax rises like CGT increase and the 50p Income Tax rate actually lost the Treasury revenue.” So why has this government been so incompetent as to introduce these damaging increases?

    Tax rates overall are far too high and the tax complexity causes further damage to growth. Only the rich non doms have a sensible tax regime, otherwise it is perhaps best just to leave or spend a lot on tax advice.

  3. Mark B
    January 15, 2015

    Good morning.

    Before I begin, I would just like to make clear, that our kind host decided, for whatever reason, not to submit my post in the previous article. I understand and respect that he has rules and has the right, as publisher, to moderate such posts. But I am writing this because, in a week were we have had debates about censorship and free speech, to have a post were I have made statements that I believe to be both fair and true and, I have made before concerning a political ideology I disagree with, and a politician whose ideology is well known and stated, not to be submitted, is a little disappointing.

    I hope our kind host has the courage to allow the above paragraph to be read, so that others are aware that some peoples views, even ones with a sound background, do not always get aired.

    I have always believed that, when you enter a profession, and politics is no different, that you should have an entrance exam before being considered for such a position. Much like our Civil Servants, Doctors, Engineers, Airline Pilots and so on, we need to know that the person is, ‘up for the job required’.

    There is another debt on the books that our kind host has not mentioned in this article. And that is of Private Partnership Enterprises. Gordon Brown MP, when he was Chancellor, used this more than he should have to take state debt off the books. A very unwise, to put it kindly, thing to do. It allowed him to claim all sorts of things but leave large problems for future governments and taxpayers. We are yet, in my view, to discover the full horror of what that man and that government has done. And like so much of the years of the last Labour government, only now are many of the chickens coming home to roost.

  4. Lifelogic
    January 15, 2015

    “Archbishops pre-election assault on the evil of inequality in Coalition Britain” I read in the Telegraph.

    Is it not time to get these dopey left wing Bishops & pushers of complete and utter nonsense out of out legislative system? We have enough drivel from the BBC already with half witted and economically illiterate programmes like “The Super Rich and Us”. Inequality of outcome is essential to create wealth and to create incentives.

    1. stred
      January 16, 2015

      When priests use the pulpit to push their political views, the congregation should heckle and turn the service into a religious Hyde Park Corner. Then they would decide to stick to religion.

      1. Lifelogic
        January 16, 2015

        But if they did this someone might take the advice of the Pope and punch them and they might get prosecuted too!

  5. Ian wragg
    January 15, 2015

    The £ is the monopoly of the government. When this shower sign up to the Euro, what then. There will be no more B of E money printing and servicing our debt would be ruinous.
    70% of the MP, s are raging Europhile despite what our host says and now they are thinking of Boris for leader.
    What about the latest ECJ ruling. Overturning German law. Angela won’t like that.

  6. John E
    January 15, 2015

    So we are doing worse than Greece in that they now have a surplus before debt repayments and we don’t.

  7. zorro
    January 15, 2015

    I hope that your boss Mr Cameron is not twanging his ruler at Osborne and listening to your lesson today as he is a major culprit at not understanding the difference in public statements!


  8. agricola
    January 15, 2015

    Thanks for clarifying something I was all too aware of. Perhaps Government will stop hiding behind any confusion and stop boasting about modest reductions in the deficit while stoking up the debt. Had my old bank manager been presented with my personal finance performance along such lines I would have received a very jaundiced look.

    In rebalancing the economy and reducing the debt we know that tax increases are counter productive. Much tax comes from intellectual rights and these can be moved over night. Low taxes overall are how you encourage business to settle in the UK. The large corporations who settle their taxes in countries of modest tax appetite would stay in the UK if we offered similar. We would get a small percentage of a vast amount rather than nothing as at present. Why should Lichtenstein benefit from our endeavours and spending.

    Government spending must be reduced. I do not want an inhumane society nor an insecure one. So we must continue to look after the sick and seriously disadvantaged while protecting our borders. All of this we are failing to do at present. I find it insane that top level accumulated benefits are set at £26,000 pa. while pensioners get £6000 pa.
    Defence spending is cut while terrorists run riot so producing the scenario for serious civil disorder. What are we doing spending £25 Billion pa. on overseas aid and the EU for no benefit whatever. Why are we on a crazy green pilgrimage to purgatory. Why are we spending £50 Billion Plus on HS2 when there is no commercial case for getting to London twenty minutes earlier than at present. Government needs a new set of priorities or we need a new government

  9. Bert Young
    January 15, 2015

    The attitude towards debt has changed considerably during my lifetime both personal and national . I was brought up to believe that you had to be able to pay for something if you wanted it ; today it is the reverse . Governments of all colours are the same ; there has been a complete disregard to paying the costs by covering their mistakes with various forms of borrowing . Every election I have witnessed has offered all sorts of “vote for me” incentives only for their errors to be counted at some later date . This irresponsibility is the result of short term 5 year reigns . We all know that debt of the size we have needs a long term determined attack and “passing the buck” on to someone else is foolhardy and unwise .

    1. Excalibur
      January 17, 2015

      Indeed, and the scale of debt has grown exponentially from millions to billions and now to trillions. There has to be a reckoning.

  10. Bob
    January 15, 2015

    “Labour doubled the debt, and the Coalition has increased it by around 50%.”

    Are you quoting the increase in percentage terms to make it sound as if the coalition’s borrowing was less than Labour’s?

    If the debt was £100 and Labour doubled it to £200 and the coalition increased it by 50%, that would mean that the coalition increased the debt by exactly the same amount as Labour, despite the Cameron’s pledge to eliminate the deficit within this parliament.

    Who writes this stuff for you Mr Redwood?

    Reply I write it and I did supply the cash figures as well!

  11. margaret brandreth-j
    January 15, 2015

    Talk about lack of foresight.Making hay whilst the sun shines on interest rates for those attempting to cumulate makes sense , even though for saving in the short term it is not good. The governent should be taking advantage of this instead of borrowing more and more. Hedging the money and waiting for the day when interest rates are higher is a safer way of ensuring growth. Instead all are going out on a schizophrenic excursion and are not able to manage the consequences .
    Borrowing for and to large concerns is necessary for financial stability and growth, but if we compare individuals who borrow and repay back double in interest they are either very well off or have their backs against a wall. What happens to the assets when all goes pear shaped?

  12. stred
    January 15, 2015

    By what proportion of GDP would the deficit have been reduced if drug pushing, horizontal sex working and charities not been added to the total in 2014?

    This caused the EU to send us a very large bill for arrears, which Mr Osborne says we are not paying, although most of us think he fiddled the figures. Is the 50% reduction also a fiddle?

  13. Brian Tomkinson
    January 15, 2015

    No doubt Cameron and Osborne would benefit from this simple explanation.
    Would you please go one step further and explain how the deficit can be eliminated by cutting spending by only 1%? I have a figure of £731bn for government spending which gives a reduction of £7.31bn per annum. If this is done for each of 3 years then the deficit will reduce by a little under £22bn. That then means that £78bn of additional tax revenues is needed to make up the difference – £26bn per annum. If taxation is currently £100bn less than spending, then growth of 3% would theoretically yield an extra £18.9 bn per annum. What growth figures are required to achieve the elimination of the deficit? I calculate it at around 4%. Pie in the sky?

    Reply The official figures imply faster growth of revenues, which also takes into account rising incomes and some inflation.

  14. alan jutson
    January 15, 2015

    I think many who read your daily blogs on this site will understand perfectly what you say John, and the fact that we as a Country have had the luxury of borrowing long has certainly shielded us to a degree from some immediate costs, but it has also shielded us from reality.

    To say that when interest rates rise things will get uncomfortable is rather an understatement.
    Many present mortgage holders will find this out in due course.

    The simple fact is all Governments should seek at the absolute minimum ,to run a balanced budget which should include an element of paying off the debt.

    The simple solution would be for no Government to be able to borrow in the peoples name by law, (unless at War,) until agreed by them at a referendum to be held annually.

    Failure of any Government to run a balanced budget should lead to an immediate election with those in charge who have failed being unable to stand in the future.

    We need to concentrate minds.

    The very simple policy of only spending 80% of last years known tax receipts should be the guide line.

    We then do not have proposed spending based on pie in the sky estimates, and guesses on growth, you simply work on financial fact.

  15. Max Dunbar
    January 15, 2015

    Very clearly explained. This needs to be posted to every household in the land!

  16. oldtimer
    January 15, 2015

    Sometimes the apparent ignorance of politicians speaking about this subject seems to be just that – ignorance. At other times I get the impression they are trying to pull the wool over the eyes of the public. Either way it is utterly inexcusable for any MP to be other than very explicit about what aspect of debt and/or deficit he is talking about.

    Conservative party spending plans are not rigorous enough. The present level of UK national debt is scandalously and dangerously high. Within UK public spending there remain sacred cows which deserve to be slaughtered. Among these I include HS2, the 0.7% of GDP foreign aid commitment (it should be limited to disaster relief), energy subsidies for otherwise uneconomic renewable energy schemes, payments to the EU to name but four. The NHS is another sacred cow which needs the introduction of more competition to help it cope with the undoubted pressures which will continue to be placed upon it. As for the non-performing tax system….

  17. Ex-expat Colin
    January 15, 2015

    Looks like the Swiss suddenly got fed up with the EU corpse?

  18. behindthefrogs
    January 15, 2015

    If the government is serious about reducing the deficit it needs a much tighter review of all its changes against this need.

    The one that horrified me was the recent change to stamp duty which included a completely un-necessary increase of just short of £1bn to the deficit.

    The forth coming election will almost certainly guarantee that the deficit will increase this year as the government buys votes.

  19. Roy Grainger
    January 15, 2015

    “Labour says we only need to eliminate the deficit for current spending, and can carry on borrowing lesser amounts for investment or capital spending”.

    This is a curious claim. Who is to define what is investment or capital spending, and in any case why does capital spending on, say, a new road or school justify increasing the deficit ?

  20. grumy goat
    January 15, 2015

    a great summary and explanation for once. You should be on news night more often

  21. Kenneth R Moore
    January 15, 2015

    JR Labour doubled the debt, and the Coalition has increased it by around 50%.

    Not really a fair comparison JR as Labour started at a much lower base and have been in power for three parliaments. Why not use cash amounts that don’t flatter so much ?.
    To set the record straight, the Coalition have increased the debt by around 500bn compared to Labour’s 400 bn.
    This from a Coalition that came in to ‘clear up the mess left by Labour’. Mr Cameron et al are now beyond ridicule.

  22. Denis Cooper
    January 15, 2015

    “However, those same taxpayers and their children will have to pay the interest on the borrowings on top of regular spending in future years … ”

    True; and no, that is not future generations sending something back in time to repay for our so-called excesses, it is future generations being obliged to keep not only whatever promises they may make, which in principle at least will be the result of decisions that they themselves make, but future generations also having to keep whatever promises we make now on their behalf without consulting them.

    “… and may at some point have to pay off some of the debt.”

    Eventually ALL of the existing debt will have to be paid off, apart from small amounts which have no dates for repayment and may never be repaid:

    Apparently some of it goes back to the 18th century:

    “In 1752, the Chancellor of the Exchequer and Prime Minister Sir Henry Pelham converted all outstanding issues of redeemable government stock into one bond, Consolidated 3.5% Annuities, in order to reduce the coupon (interest rate) paid on the government debt …”

  23. Bill
    January 15, 2015

    I am not an economist or a financial expert nevertheless, like any other voter, I try to understand what is going on. What you say in this column makes very good sense to me. I do understand – and no one seems to deny – that if we borrow more than we raise in tax, the money we borrow has to be repaid. That is what the word ‘borrow’ means. I also understand that monetary values change either by inflation or deflation. But if you make repayments with inflated pounds, you must do so at a time when prices and incomes rise in an uncontrolled spiral as happened in the period after the 1960s and which caused Wilson and Callaghan such headaches.

    Equally, if we defer repayments we are simply placing a burden on the next generation or generations. The idea that this is ‘overdone’, as suggested by petermartin2001 seems to me to lack altruism and responsibility.

    1. petermartin2001
      January 17, 2015

      What you say is true for you and I. We are users of the currency. It’s not true for an issuer of the currency. There always has to be one issuer. Money/currency can’t just appear from nowhere. So issuers issue. They have to create liabilities in the process of issuing. That’s inevitable. So all countries, which issue their own currency, have a National Debt -even successful ones like Singapore. (>100% of GDP)

      Of course, no-one is worried about the debt levels of successful countries. Their economic strength guarantees, or as close to guarantees as is possible, any liabilities which are issued. That applies to the UK too. Future generations will depend on how well we run our economy now. How well we train our younger generation, which will be the older generation to them. They won’t benefit if their older generation haven’t developed their skills and abilities because they haven’t had the career opportunities that the post-war generation have had.

      We’ve been a fortunate generation. How have we suffered from the high debts generated by war? We haven’t in the slightest.

  24. ian
    January 15, 2015

    In last 30 years your currrency has lost 60% of it value, plus 1.5 trillion in debt and counting.

  25. Denis Cooper
    January 15, 2015

    From two days ago:

    “Germany stops accumulating fresh debt”

    “The German government on Monday (12 January) confirmed media reports that the country for the first time since 1969 will not accumulate fresh debt – one year earlier than previously envisaged.

    Record tax revenues of €278 billion, €10 billion higher than in 2013, low unemployment, coupled with near-zero interest rates on outstanding German national debt, meant that in 2014, the government broke even and did not need to raise extra money on the markets.

    Initially, finance minister Wolfgang Schaeuble had earmarked €6.5 billion in fresh debt for 2014 and said that in 2015, the budget will be balanced.

    Ever since 1969, no other German government has managed to avoid raising fresh debt, with a burden of over €1.3 trillion accumulated over the years.

    Breaking the debt cycle will likely give Germany even more authority in the European discussions about how to apply EU deficit and debt rules, be it for France, who is struggling to keep public spending in check, or for Greece, where upcoming elections may bring anti-austerity Syriza to power.”

    As I understand one contention of the “print and be damned” faction represented in comments on this blog, the fact that the German government is running a balanced budget, only spending as much as it is receiving in revenues and borrowing nothing, must as a mathematic truth mean that Germany as a whole is also running a neutral balance of payments; but that doesn’t seem to be the case, it seems that Germany is still running surpluses not just on its trade but on all of its external transactions taken in their entirety. Maybe I have misunderstood the theory here?

    1. acorn
      January 16, 2015

      Germany runs circa 7% current account surplus circa €180 billion. If it was still using the DM this would not be sustainable as it would end up “saving” a lot of foreign currencies, which would be no good for paying German wages back home.

      To cut a long story short, Germany gets a massive advantage from being in the Euro. The southern members are pulling the currency down making German exports cheaper. BUT, the big plus is that about half of German exports are paid for with Euro as Germany exports goods (and its unemployment) to other Eurozone members.

      Those Euro do pay the wages; investment and the savings requirements of German households and firms. They stop German domestic economy stagnating as Germany over exports.

      1. Denis Cooper
        January 16, 2015

        If companies based in Germany are successful exporters and get in money, however denominated, then that is their money, not that of the German government. Hence I still do not see this supposed direct connection between the finances of the German government, which is just one actor in the economy of Germany, and the overall finances of all the many actors in the German economy, nor indeed do I see how the undoubted advantages of the euro for German exporters creates a direct connection which would not otherwise exist.

        1. petermartin2001
          January 17, 2015


          Germany runs a 7% (of GDP) export surplus. That means, whatever currency it uses, that there is more money coming into the economy than leaving. So where can it go? It can be saved by German citizens and companies. And it is. The Germans are big savers. Or it can taxed away by the German taxman. That happens too and converts what would otherwise have been a government budget deficit into a surplus.

          1. Denis Cooper
            January 18, 2015

            It’s not exactly a problem for a country if the companies based in its territory are raking in huge profits from their exports, is it? The companies can use the money to further improve the efficiency of their home units; or they can buy up competitors in foreign countries and either improve their efficiency or just shut them down; or some of the money can be channelled into buying up alternative assets in foreign countries, including land, possibly with lucrative mineral rights, and property, so providing other streams of income which could give some protection if for whatever reasons the present export industries start to fail; and as you say the government of the country can directly or indirectly take some of the export profits as taxes, and use that money to improve physical infrastructure or education or health systems without having to borrow and pay interest to fund a budget deficit; if the government consistently runs a budget surplus it can gradually reduce, or if it so chooses eventually entirely eliminate, its own debt, so that it no longer needs to use any of its tax revenues to pay interest; it can also buy up the debts owed by the governments of other countries, and so eventually have them over a barrel during international negotiations; it could also afford to back up its diplomatic power with military power, which it could project around the world as necessary; taken to the extreme, which has never actually happened yet but in theory could happen, the government of a successful exporting country, and the companies based in its territory, could end up effectively controlling the whole of the world while the governments of all other countries, and their peoples, had been subjugated by a combination of financial and military power.

  26. A different Simon
    January 15, 2015

    It’s about power and control – and perhaps fear of losing both .

    Does the political class consider the common man the enemy ?
    Or does the political class misguidedly believe it is acting paternally ?

    The idea of plebs frivolously flying away for holidays is certainly abhorrent to some . Queue the global warming scam .

    Rather than empower the masses , it is clear that the objective is to enslave individuals (and nations) and debt is the chain of choice .

    A couple of strategically placed global financial crashes and hey presto , wealth transfer achieved .

    The obsession that everyone (including mothers of young children) works long hours till they drop looks little more than a means of ensuring we are too brow beaten to revolt .

    What did our infants do to deserve their education being replaced with indoctrination which emphasises quote “the social outcome function of education” ?

    Everything is going to plan .

  27. RupertP
    January 15, 2015

    Arguably, the level of state debt should be adjusted to take into account the quantitative easing undertaken by the Bank of England, which is really just another arm of government.

    As of the latest report from the BoE, the bank’s “Asset Purchase Facility” is now holding £375 billion of gilts, 25% of the total state debt, all financed by money printed out of thin air on the BoE’s balance sheet. Assuming they continue to hold these gilts in perpetuity, the government is paying interest to itself when it pays the interest on these gilts, so it is not actually burdening future generations when the bank buys up gilts in this way.

    Furthermore, the bank has successfully reduced the market interest rate for the remaining gilts held by third parties, so the cost to the public of paying the interest on the 75% of the state debt held by the general public is almost certainly considerably lower than it would otherwise be.

    The risk is that the politicians (Labour?) become addicted to this apparent “free money” from QE (money printing) and in the coming years they run too big a deficit so that too much money is printed out of thin air. If there is too much QE / money printing, then confidence in the pound will be lost, the pound will devalue, inflation will rise and that is the point at which we will then really have an issue, as inflation (and interest rates) would then really take off.

    How much is too much and when is confidence lost? This is anyone’s guess, especially in a world where all the major western central banks are doing the same thing.

    1. Denis Cooper
      January 16, 2015

      Equally, it is arguable that the level of state debt should also be adjusted for the volume of money which has been put into circulation by its central bank; just as gilts are a form of IOU issued by one arm of the UK state, the Treasury, so sterling is another form of IOU issued by another arm of the UK state, the Bank; and when the volume of the second form of IOU is increased by the Bank as part of the process of transferring some of the first form of IOU into its ownership that does not diminish the overall level of indebtness of the UK state.

  28. Denis Cooper
    January 15, 2015

    I imagine that future generations may well curse us for what we have allowed to happen with QE, not because the creation of £375 billion of new money for the government to spend has itself had major deleterious effects but because it was done without truthful and honest debate, let alone proper transparent democratic control, and that has set a very bad precedent to be followed by governments in the future.

  29. a-tracy
    January 15, 2015

    Our generations are so selfish expecting our children to pay off the excesses. They’ll get their revenge when they just don’t honour our state pensions, pension credits, winter fuel payments etc!

  30. Hefner
    January 15, 2015

    The Government appears keen on suppressing mention of RPI and stick to the CPI. What about all the government bonds indexed to RPI, some of them not to be redeemed before the 2060s?
    Also, are we not going with the new flexibility on the use of pension pots from April 2015 to get in the same kind of mess seen in the 1990s when lots of people were “encouraged” to move from occupational pension to personal pension, without almost any regulation created to deal with the hundreds of financial firms keen on benefitting on the manna of money so released? George Osborne has been good at talking about the freedom given to 55+ people, but has not addressed the freedom given to financial/insurance companies to rob the public.

  31. Lifelogic
    January 15, 2015

    So Osborne claims the UK could be richer than the USA by 2030 – a mere 15 years.
    Indeed and so it could be. But certainly not with the sort of tax, borrow and piss down the drain, bloated government, 299+ tax increases, IHT and EU ratting, over regulation, daft employment laws and similar steam of damaging nonsense that Cameron/Osborne and the Coalition endlessly push. Not what we are likely to get from the even worse Ed Miliband/Balls.

    For a start having energy at twice the US price (due to the bonkers Cameron/Ed Davey religion) is hardly likely to help much not is the endless stream of drivel regulations from vacuum cleaners to coffee machines, gender neutral pensions to landfill regulations, OTT building regulations to the EU attacks on the City.

    Do Cameron and Osborne even know what “a competitive advantage” actually means, perhaps it is not covered by Oxford PPE or Oxford Modern History? If they do then why on earth do they keep heaping endless competitive disadvantages onto UK industry?

  32. Matt
    January 15, 2015

    Worth laying out certainly.
    I strongly suspect that the debt and deficit would be better understood by the general public if our parliamentarians didn’t keep mixing them up.

    My impression is that the idea behind Labour’s approach is that state “investment” boosts economic growth and thereby future tax revenue and therefore shouldn’t be considered as deficit. That sounds reasonable until one remembers that they have a history of categorising spending as investment when it suits them in which case the model breaks down.
    Only by simplistically lumping all state spending together and then looking whether tax revenues cover it can we, the public, be sure that the government is running the state finances prudently.

  33. Mark
    January 15, 2015

    There is of course another way in which the state becomes indebted – when it takes on obligations of entities it nationalises or offers guarantees for. In recent years, these have been dominated by the banking sector – yet Labour’s proposals for formal renationalisation of several industries (utilities, railways) would add substantially to that burden. The real problem with state run enterprises is that they no longer benefit from the spur of competition, so they become added deadweights on the economy.

    Reviewing the figures for PSND (which include these obligations), it is encouraging to see that they have in fact fallen over the course of this Parliament – although whether that is on a sustainable basis is perhaps an open question. Banks are not off life support until we have seen our property bubble unwind.

    January 15, 2015

    As I write IMF Chief Ms Lagarde is live on TV saying she was not informed by the Swiss of their bombshell today of removing the cap on their currency. It has been a surprise for all major national and international financial organizations. It is a surprise that it is a surprise. I must be viewing the correct Business TV network.

    Debt and Deficit is variously understood and not. But what it amounts to is a series of snapshots of a continually changing national economic picture where a world panoramic video coverage would be more useful. But even then, there would be nothing one could predict with perfection. There will be more surprises for the IMF, in my view, and a realization as time proceeds by the US government that America for all its massive wealth and skill cannot even now produce so much as a nut and bolt as cheap or cheaper than every other industrialized nation on the planet. There are shocks and surprises in the pipeline and even squinting a focus on Debt and Deficit and reiterating the definition is not something likely to concentrate Parliamentarian minds, generally. Unfortunately.

  35. acorn
    January 15, 2015

    JR, when the little people eventually find out this huge con’ trick you are playing on their lives. Crikey! there won’t be enough rope or lamposts to go round in the social media rampage.

    Anyway, according to the OBR (EFO December 14):

    “3.93 The saving ratio is expected to fall back slightly between 2014 and 2019. Taken together with strong growth in household investment, this will push households’ overall net lending position – total income less total spending – into deficit. In an accounting sense, this, together with a gradual improvement in the current account, provides the offset to the Government’s fiscal consolidation (Chart 3.41). With negative net lending and strong house price growth, the ratio of households’ gross debt to income is projected to rise again from 2015, having fallen steadily since 2008 (Chart 3.31). 3.94 The gross household debt to income ratio has been revised up significantly since our March forecast. This reflects a number of factors: in cash terms, the level of gross debt is expected to be around £174 billion higher by the start of 2019 than we expected in March.”

    The chances of this OBR forecast getting to be anywhere near correct are slim to zero.

    BUT, the bit the voters thankfully will have no idea about is that Osbo’ is going to reduce his deficit to zero, by tricking households into considerably increasing their “debt to income ratio”. How will he do that you ask. “Equity release” on the back of a bubble in house prices. He knows it will work because government has done it before; successfully.

    Unfortunately, households will have to give up a few imports, if UK plc can’t get its exports and imports nearer to balance. The fact is that either the private sector (households and firms) pay for the net imports or the public sector does; and, Osbo’ ain’t gonna pay anymore; he reckons.

    Be aware that the fact Osbo’ did not get his zero deficit by this election time (Plan A), is not altogether his fault. If the private sector demands to SAVE “financial assets” (government fiat money), then Osbo’ has to supply those savings, by running a budget deficit. The budget deficit he currently has is keeping the UK economy from going back into recession. Be thankful that we are not Greece; Spain or Italy. They are not given an opportunity to run a deficit anywhere near what is required.

  36. ian
    January 15, 2015

    Switzerland will be trouble today for not telling IMF and the rest about what they were about do, they would like to beat them up but they are to strong for them. They must hate it a little country with all that power. A country that thinks for it self and comes out on top. Are lot must look on in envy.

  37. ian
    January 15, 2015

    Your right john it not the so much the debt, as the pension pay out in the future with the golden hand shakes and the future money to be paid out for past sign agreements.

  38. Bazman
    January 15, 2015

    Collecting what they should and stopping large companies from evading tolls commonly called tax for use of infrastructure, security health and education would be a start. Reducing subsidies to companies paying low wages via the benefits system and making the ones who can pay a living wage from their profits. Massive government contracts awarded on condition of this is also a no brainier. Why should the population have to face cuts to benefits and services to fund their profits many of which avoid tax and end up offshore.
    They often have one customer and no competition so don’t tell us about needing to attract them. Profits are dead cert for many including the utility companies.
    The point is if a company is no use to this country and causes a drain why are they allowed here?

  39. Bazman
    January 15, 2015

    I always instruct my butler to tell anyone who contacts me by telephonic or other electrical means to 7$&! off and leave a message at my gentleman club.
    David Cameron today tell us that the wants to ban encryption to prevent anonymous web communication. Encryption through other anonymous cloaking methods was not thought of one presumes?
    Try looking for ‘security guide for beginners’ first Dave. What next stopping the night?
    The main thing for the security services to do is wait until they the bad guys, or anyone else for that matter slips up in some way. Depends on what you are doing, how technical you are and crucially how paranoid you are as to whether you are detected or caught and probably by some quite simple unencrypted and open information such as your name or some other information even PC Plod could find. Like Facebook which is usually ignored as we have seen. Hide in plain sight it seems.

  40. David
    January 16, 2015

    Dear John (or anyone else who can respond)

    With regard to the Labour policy of controlling Current spending, whilst Capital spending is not I smell a large rat!

    That is that (as I have seen in business) spending items can be retagged as ‘Current’ or ‘Capital’ with a bit of jiggery pokery. Therefore it would be quite easy for Labour to show how Current spending was under control whilst Capital expenditure went through the roof.

    Could those who know, explain the rules here. Of course it is easy to say that there are rules clearly laid down about what constitutes Current or Capital Spending – but surely those rules can be bent or changed or open to interpretation.

    My view is that we should have very strict control on the definitions and application of Current and Capital expenditure.

    Any thoughts?

    Thanks, D

    1. petermartin2001
      January 16, 2015

      Yes you’re right. Current spending is going out to the pub for a few drinks. Capital spending is building a house. For example.

      That applies to government too. So current spending would be paying out dole money. Capital spending would be on building something useful. That could be housing too. So if government spent to build £100 million worth of housing they would get that back and more besides. They’d get nearly all that money back in taxes, and welfare savings, and when they came to sell the properties they’d get it back again. The government would end up well ahead.

      So sensible capital spending can help solve the problem of homelessness, unemployment, and at the same time reduce the deficit. But I agree we’d need to be careful that any increase was ‘sensible capital spending’.

  41. petermartin2001
    January 16, 2015

    We’ll all have noticed that the Swiss franc has suddenly been allowed to float and its value jumped by 40% at one point. This has caused some surprise in the markets.

    It shouldn’t have. The Swiss had been running a 16% GDP surplus. What is the point of that? It means they were shipping much more goods and services to the rest of the world than they were receiving in return. If anyone thinks a surplus is a good thing I’d be happy to trade with them. It would mean they’d give me more stuff than I’d give them back. I’d make up the difference with an IOU of course.

    Those IOUs issued to Switzerland are one reason the UK is in debt. If the exporting countries like China , Germany and Switzerland countries insist on accumulating financial assets, which they have no intention of spending, then someone else has to hold the liabilities. It’s just double entry bookkeeping.

    Ironically, it has meant the Swiss have created a debt for themselves to. They’ve been printing large numbers of Swiss francs to keep their currency cheap and pay the export invoices of the Swiss exporters in SF. They don’t want pounds or Euros. So the Swiss central bank/government now have lots of assets in dollars, pounds, and euros which they can’t spend but lots of liabilities in Swiss francs!

    1. Denis Cooper
      January 17, 2015

      “I’d make up the difference with an IOU of course.”

      Which casual statement is enough to show why you and others who think(?) like you should never be allowed to govern our country; your personal bankruptcy would be certainly be a significant event for you and your family, and for your creditors and their families, but on the wider national stage it would be of little importance; however we would not want it to be translated to the bankruptcy of the whole of our nation under your feckless direction.

      1. petermartin2001
        January 18, 2015


        You’re missing the point. If you and I agree to trade, under the terms that it is always you who runs the surplus, then no matter how many IOUs I give you, to make up the difference, you can’t do anything with them. That would mean you’d ceased to be the surplus trader. Therefore, I’m perfectly safe from bankruptcy. Furthermore, you are always giving me more ‘things’ than I give you in return.

        I were a country, then my IOUs would be my designated national currency. Lets call them crowns. I can create as many crowns as I like. So even though the countries I do trade with have never made any formal commitment to be the surplus trader, that’s the way they like it. They give me more stuff than I give them and they take my crowns in return. So, can I go bankrupt now? No I still can’t. If they are happy to accept crowns, instead of real goods and services, that’s their decision.

        But suppose they change their mind? Suppose China, Germany and Switzerland, too, decided they wanted to become net importers. Could they bankrupt countries like the UK, and the USA? Well, no. Of course they couldn’t. But it would possibly mean that the UK and USA would have to assume the role of net exporters. Instead of the UK running a 5% deficit we’d have to run a 5% surplus. That’s the only way the ‘debt’ can be ‘repaid’. Would that be so terrible?

        1. petermartin2001
          January 18, 2015


          Which casual statement is enough to show why you and others who think(?) like you should never be allowed to govern our country

          You can rest assured that I have no personal ambitions in that regard. However, those that actually do govern our country must secretly think like I do, because the way the system works is exactly as I’m describing. As I think you already know.

          And the system does work. In 2007 we were the richest we’ve ever been, with the highest ever standard of living. Yes, the events of 2008, and those in the years following were a blip, and of course the system could work better. It would work better if everyone had a better understanding of it all.

        2. Denis Cooper
          January 19, 2015

          Of course they can make good use of the IOU’s you have given them; I’ve explained in detail elsewhere how they can use them to achieve complete dominance over you, if that is their ambition.

  42. Lindsay McDougall
    January 19, 2015

    Conservatives are entitled to point out that reducing the deficit in Labour’s manner would necessitate a significant rise in the standard rate of income tax. It’s the only way to square the circle.

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