Real public spending up again in UK – and welfare spending too

Yesterday saw the release of the June figures for spending, taxing and borrowing. Over the year June 30th total public spending rose by 2.9% in cash terms. As there was no inflation over that year, that is a real increase of 2.9%. I look forward to a flood of articles praising the end of austerity and recognising that real public spending is rising.

The welfare figures also show that despite a good year for creating jobs and getting more people off welfare and into work, the combination of higher rates, more people eligible for various benefits and better take up has led to a 3.6% real increase in the amount of welfare paid out.

The deficit came down a bit, thanks to revenue growing at a lively 4.4%. That’s a big real increase in tax receipts, thanks to higher incomes and more items being purchased and attracting VAT. It would be welcome if more commentators writing about the economy worked from the actual Treasury figures, instead of relying on misleading and wrong opposition soundbites. In order to discuss how we can best look after those in need, we first need to know how much we are currently spending and why it is going up.

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100 Comments

  1. Mark B
    Posted July 22, 2015 at 5:53 am | Permalink

    Good morning.

    The EU will be pleased. They can charge us more to stay in their UNION and subsidise other Member Countries like Greece.

  2. Lifelogic
    Posted July 22, 2015 at 6:01 am | Permalink

    Why indeed is state expenditure going up and why does the state sector deliver so little of any real value?

    Poor roads, poor trains, a dysfunctional NHS, generally poor schools & universities, dreadful social services, a dreadfully inefficient MOD procurement system, the hugely damaging EU, the pointless & expensive energy/greengrap, the appalling bank & financial regulation system, an absurdly complex tax systems (and an HMRC who cannot even be bothered to answer the phone), a legal system that is slow, perverse, largely random, expensive and very inefficient, what on earth are we paying for?

    So much that the state deliverers is actually of net negative value, distracting the far more productive private sector into pointless activity too, with absurd regulations, daft misguided subsidies, pointless green crap, largely absurd EU regulations and a totally bonkers tax & benefit system.

    Yet what do we get from Osborne in the budget? More huge and unfair tax increases, more attacks on pensions and the hard working and yet more absurd complexity. Plus he rats on his IHT promises of 8 years ago and start to thief of landlords.

    We are spending nearly 50% of GDP on the state sector for what might well be, on balance, a net negative output from them in terms of benefits and services.

    • Lifelogic
      Posted July 22, 2015 at 6:19 am | Permalink

      Also why does the government think it is fair for circa 20% who work in state sector to be remunerated at about 50% more than workers in private sector (this when pensions are included). Furthermore the state sector take more sick days, work fewer hours, retire earlier, have better job security and enjoy better working conditions and more sociable hours on average?

      Why given this huge unfairness in pension provision is Osborne continuing to attack private pensions with his new mugging taxes?

    • alan jutson
      Posted July 22, 2015 at 11:49 am | Permalink

      Lifelogic

      Are you surprised ?

      Just been contacted by an old work colleague who says a local resident to them (who has never worked since entering the Country) is due to be deported on Friday.
      This person has been advised to claim Disability Living Allowance before Friday (the day of deportation) in order to make sure they still get paid by the UK taxpayer after they have been deported, and have returned to their country of origin.

      They have gained an appointment with a Doctor for tomorrow.

      I could not believe this would be possible, so have just Googled “Deportation on Benefits” and it staggers me to find that this is not only possible, but happens and it costs £millions, with many highlights listing of lots of cases.

      I have to say John, for once I am absolutely lost for words.

      Who in their right mind even thinks this is a right way to spend taxpayers money, when we are making our own citizens (many who have paid into the system) go without in our own Country.

      Your Government needs to get a grip, and a grip fast to change the rules on the Welfare and the Benefits system to stop this type of nonsense.

      No wonder spending is GOING UP !

      Please, please tell me this is in hand to be stopped.

      • Lifelogic
        Posted July 22, 2015 at 6:38 pm | Permalink

        Absurd, but almost nothing surprises me any more about the use/abuse/waste or filching of tax payers money.

        Still some good news, it seems photo-voltaic solar farm grants are finally being killed off at last. The sooner the better (and wind both on and offshore please).

        • Hefner
          Posted July 22, 2015 at 8:38 pm | Permalink

          You’re a funny guy, Lifelogic. You are happy to see grants for solar PV installations been killed off, most of them not going to “farms” but to individual housings, but do not seem to object to the even larger subsidies by factors of hundreds that the private companies in the nuclear energy sector (most of them non-UK) are going to pocket for providing electricity, not likely before 2023.

          It is sometimes difficult to follow your “arguments”.

          • Lifelogic
            Posted July 23, 2015 at 8:04 am | Permalink

            I am not keen on subsidies for nuclear either but at least it is not intermittent like wind and pv. Let’s have a level playing field and get fracking.

          • I.wragg
            Posted July 23, 2015 at 9:57 am | Permalink

            Nuclear power provides power at base load i.e. whatever it says on the turbine nameplate. 1000 megawatt equals 1000 megawatt 24 hours each day and 7 days each week.
            The reason we are having to pay an inflated price is due to the stupidity of politicians refusing to countenance building of nuclear power and Brown selling off Westinghouse which we owned.

        • APL
          Posted July 23, 2015 at 6:21 am | Permalink

          Collection of solar energy can at best recover ~ 1.4 Watts per square meter. The conversion efficiency of a solar cell is about 20%, so 80% of your 1.4W is lost.

          That’s on a good day with the sun overhead in the middle of summer. The rest of the year with cloud cover in Northern latitudes, it’s even worse.

  3. Old Albion
    Posted July 22, 2015 at 6:07 am | Permalink

    Looking at MP’s pay, austerity must be over? 10% equating to approx. £7K/yr.
    I’m glad we’re ‘all in this together’ and looking forward to a 10% rise in my pension.

    Reply I have not written about this issue because MPs pay is independently settled by IPSA and we have no vote or say in it. Remember IPSA has constructed a cost neutral package, so the pay rise is offset fully by the expenses and pension cuts.

    • Lifelogic
      Posted July 22, 2015 at 10:52 am | Permalink

      I suppose you have to look at it in the round. JR and a few others are clearly worth much, much more than the salary they get, but about 70% of MP with their mad ideas are clearly worth far less (many a negative sum) and often do positive damage to the country. John Major with his ERM for example.

      In general with MPs the less you pay the better the MPs you will get. The last thing we need is more career MPs.

      • Hope
        Posted July 22, 2015 at 4:23 pm | Permalink

        JR, what a cop out. IPSA is neutral. No they are not. Cameron threatened to get rid of it if it did not change. While MPs remain in charge of it it can hardly be described as neutral. Cameron claimed he would not accept the pay rise then he would. As for the cost neutral nonsense, there are too many MPs, you will recall Cameron was going to reduce the number, overwhelmingly against your comment is that it is a part- time job! You have cited it here many times. A very over paid part time job at needs no qualifications. Read Janis Burns open letter of the real world as a junior doctor and how much doctors are paid, the hours they work and compare with MPs. No radical changes as Cameron promised 6 years ago all wind and bluster. Why is there no proper right to recall, reduction in number of MPs no sitting room in the Lords? The UK has the second highest number of politicians to the Polit Bureau! And now Osborne wants another final layer of Mayors, while public spending is in reign and are taxes go up again!

        Reply I was replying to constituents early this morning, and will doubtless be doing the same this evening. An MP is rightly on call 7 x 24. This government may well bring forward proposals to reduce the number of MPs – the Lib Dems blocked that in the last Parliament.

        • Lifelogic
          Posted July 22, 2015 at 6:39 pm | Permalink

          Indeed why still no proper right of recall?

    • Old Albion
      Posted July 22, 2015 at 4:06 pm | Permalink

      Reply I have not written about this issue because MPs pay is independently settled by IPSA and we have no vote or say in it. Remember IPSA has constructed a cost neutral package, so the pay rise is offset fully by the expenses and pension cuts.

      My reply ……………….yeh right!

      How very fortunate IPSA came up with 10%. Had they come up with 1% you lot would have sacked them and made you’re own decision.
      If you think anyone believes MP’s won’t carry on extracting every bent penny they can from the scandalously easy expenses claims, you must think the public are total fools.

      Reply Not so. There were no plans to abolish IPSA whatever they came up with.

      • alan jutson
        Posted July 22, 2015 at 7:29 pm | Permalink

        Old Albion

        Not my business to defend Mp’s pay or terms and conditions, and I am certainly no fan of MP’s abusing the system with regards to expenses etc, but they are not getting a 10% rise per year, are they.

        To the best of my knowledge they have not had a rise for at least 5 or more years, they will not get another one for another 5 years so 10% over more than 10 years is actually less than 1% per year.

        Not exactly a fortune and very comparable with many other positions within industry, civil service local government and the NHS.

        • A different Simon
          Posted July 22, 2015 at 10:30 pm | Permalink

          They must be relieved they are not paid on results and don’t have their performance assessed by OFSTED .

          Still I would be happy to pay them what they ask but only once the MP’s employment contract is made exclusive .

          We need full time MP’s not people who split their time between the job and directorships and consultancy etc .

          I’m massively in favour of private enterprise generally but not on the part of sitting MP’s .

    • APL
      Posted July 23, 2015 at 6:23 am | Permalink

      JR: “and we have no vote or say in it.”

      Suddenly, the House of Commons is impotent!

  4. Pete
    Posted July 22, 2015 at 6:17 am | Permalink

    Just wait until the HST white elephant starts draining funds, or maybe that will be hidden behind accounting fraud as so much government debt is. Our deficit is the second highest in the world. Debt increases daily. Greece is doing better at cutting it’s deficit than Britain and we’re in the position of soon having to borrow more to lend to Greece. Meanwhile more borrowing to finance the RAF bombing Syria (despite all evidence that it won’t work) and to use as bribes/kickbacks a.k.a foreign aid.
    The only reasons I can see for there not being a run on the pound given the massive money printing is George talking a good game. Personally I’m amazed the con game has lasted so long.

    Reply The UK is not borrowing more to lend to Greece. The EU is lending to Greece and the UK is protected against loss on the loan.

    • JoeSoap
      Posted July 22, 2015 at 11:56 am | Permalink

      Reply to reply:
      Weasel words.
      The facts are
      The UK is borrowing – agree?
      The UK is paying money net to the EU – agree?
      The EU is lending to Greece – agree?
      Therefore the UK is borrowing to lend to Greece. Put very simply our net borrowing would be lower were we not paying the EU through its stability mechanism to lend on to Greece.

      Reply Not so. The EU is borrowing in its own name to lend to Greece and has indemnified us against any possible loss they may make.

      • JoeSoap
        Posted July 22, 2015 at 12:03 pm | Permalink

        The fact that our payment to the EU includes an insurance element against us not being repaid is irrelevant. The fact is that that taxpayers’ money has been collected for benefit of the UK and has been chucked elsewhere.

        • Hope
          Posted July 22, 2015 at 4:58 pm | Permalink

          The EU is the 28 nations, the UK is sadly part of that and sadly Cameron made false claims that he got the UK out and made disparaging remarks against Gordon Brown for signing us up! He claimed of his opponents more tax, more debts. What a shyster to make such remarks then do exactly the same.

  5. APL
    Posted July 22, 2015 at 6:18 am | Permalink

    JR: “As there was no inflation over that year, ”

    I really have to ask, where you get these crazy notions?

    The currency buys less of anything, Even an MP.

    Reply I am using the official inflation statistics, as most people do. MPs pay rise cancels out MP expenses and pension cuts so MPs cost the same this year as last.

    • Hope
      Posted July 22, 2015 at 4:25 pm | Permalink

      Good grief JR, no private company would have so many part time staff to do so little when the whip system negates their very purpose. We witnessed this week that parliament voted against bombing Syria and Cameron ignored it. Why so many MPs?

  6. Posted July 22, 2015 at 6:23 am | Permalink

    “…..As there was no inflation over that year, that is a real increase of 2.9%”

    Good. And what was growth over the year to June 2015? Wasn’t that about 2.9% too? Is that any co-incidence?

    If the economy is neither saving nor desaving, and balance of payments in trade is steady then any extra money injected into the economy has to result in either inflation or growth.

    Keynesian economics in previous eras has erred towards generating too much inflation. I think its fair to admit that. But, in present day circumstances of considerable slack in the economy, Keynesian economics works in the way JMK intended it to work.

    So keep up the good work!

    PS The same stimulus will work just as well in the year to June 2016. It doesn’t have to be an election year!

    • Gary
      Posted July 22, 2015 at 9:48 am | Permalink

      keep up the good work ?! I hope you’re being facetious.

      Their bogus inflation numbers do not include the 30 year record price of bonds, the largest market in the world. That’s where all the funny money is going. And when, not if , that cracks you and I will be knee deep in worthless money in an hyperinflation event that will ruin our lives.

      And you’re congratulating these people ? Incredible !

      Reply UK government bonds have fallen in recent months – the 10 year – and other- yields have risen.

      • Posted July 22, 2015 at 7:10 pm | Permalink

        Gary,

        JR is right to say that bond yields have rise slightly in recent months, but they are always changing slightly. They are still lower than one year ago. They are just over 2%.

        That’s very low. If the markets felt there was the slightest chance of your hyperinflation forecast being correct the yields would be somewhat higher and therefore their price would be lower. There has to be that inverse relationship. Think about it!

        PS Don’t waste your money buying gold bars! There’s going to be no UK hyperinflation in the foreseeable future!

    • Stephen Berry
      Posted July 22, 2015 at 3:47 pm | Permalink

      Yes, it’s just a coincidence, Peter.

      You can have GDP growth of 2.9% and public spending going up 2.9%. You can have growth of 2.9% with public spending going down. And you can have no growth at all with public spending going up by 2.9%. After all, it’s not as if the government has to spend more for there to be more economic growth.

      The only way to grow an economy and raise the general level of wages is to increase the productivity of labour, and this occurs by capital investment, gradually over a long period. This gradual rise in real wages is typical and normal for any developed capitalist economy. It happens automatically and indefinitely, without requiring any political action.

      Fiddling around with demand in the Keynesian style is at best irrelevant. If the economy does not have the appropriate structure, attempts to get rid of the ‘slack’ merely result in stagflation – as we found to our cost in the 1970s.

      • Posted July 22, 2015 at 7:22 pm | Permalink

        ” it’s not as if the government has to spend more for there to be more economic growth.”

        That’s true. But someone has to spend more. Economic growth means rising incomes. All our incomes come from someone spending. In fact all spending creates an income for someone. So the simplest equation has to be that:

        SPENDING = INCOME

        There’s three possibilities to get more spending.

        1) We can get our overseas customers to buy more of our exports. ie Export led growth. That’s possible but unlikely IMO
        2) We can encourage consumers to borrow more and therefore spend more. That’s unlikely with so much private debt in the economy.
        3) Government can spend more.

        There aren’t any other possibilities to get the growth we all seek.

        • Edward2
          Posted July 23, 2015 at 7:24 am | Permalink

          Economic growth will make consumers better off so they don’t always need to borrow more in order to spend more.
          For example
          The Government could reduces their taxes leaving them with more income after tax.
          Or the costs of their outgoings could fall eg energy costs, transport costs, rents, council taxes, duties on beer wine tobacco etc leaving them with more spending money.
          Or the pound might move in their favour making imported purchases cheaper and foreign holidays cheaper leaving them with more surplus spending left.

          Or they could just use their savings.

          • Posted July 23, 2015 at 9:56 pm | Permalink

            Edward2,

            Yes you’re right about the taxes. I should have said that the Government should spend more or tax less .

            You’re right too about the savings! I should have said “desave” rather than borrow! The word desaving isn’t much used outside economic circles, but it means what it says, with the implication that borrowing might occur if there aren’t enough savings.

            One of the points of contention between Keynesian economics and “mainstream” economics is the possibility that we can have economic growth at the same time as generally falling prices. The mainstream use models which allows for that possibility. The problem is that we don’t see it in reality.

            In their theory there should be no problem in Greece because prices and wages should self adjust internally in exactly the same way as they would if there were a general devaluation of the Greek currency.

            But there is a problem obviously!

        • libertarian
          Posted July 23, 2015 at 7:34 am | Permalink

          Petermartin2001

          “There aren’t any other possibilities to get the growth we all seek.”

          Yes there is, in fact the only one that really works in the long term as Stephen Berry says, capital investment in new business , creates new products & services, new ways of buying things ( i.e. cheaper, more accessible, rented rather than bought etc), creates new jobs, puts wages and taxes into the economy. Capitalism works and always has, despite government trying hard to slow it down or even stop it.

          One of the reason we lag behind Germany is that German firms are allowed to invest part of their profit before Corporate tax in developing their businesses. We aren’t its all taxed.

          • Posted July 23, 2015 at 11:06 pm | Permalink

            “Capitalism works and always has, despite government trying hard to slow it down or even stop it.”

            I would partially agree with the first part of the sentence . I’d say for most of the time and for most of the people in the western world. However the second part ignores the historical record. Capitalism was at its best in the period 1939 – 1980 when there was much more government regulation than many of those on the political right would have approved off . The big change, of course was that the western economies had to be mobilised for the war effort and the lessons that were learned in that mobilisation were carried on afterwards.

            Some would say the war didn’t really end in 1945. The war economy continued until the fall of the Soviet Union in the late 80s.

            The idea that you can make the engine of capitalism run faster by removing all the control mechanisms is only true for short time scales. In the end things go badly wrong as we all saw happen in 2008.

        • Stephen Berry
          Posted July 23, 2015 at 1:33 pm | Permalink

          “Economic growth means rising incomes”

          I admit Peter, that in an inflationary age the origin of economic growth tends to get hidden, but the above should really read, “Economic growth means a rising purchasing power for wages.” After all, rising incomes would be no good if the prices of goods were rising even faster. The key here is that if goods are getting cheaper for us, then our standard of living is rising. It could even be that our wages do not rise at all, but a general fall in the prices of goods increases our standard of living. This might well occur if the money supply were kept constant.

          John has recently posted some contributions on how to increase the productivity of labour. This is at the heart of economic growth and, as I said, it basically occurs by increases in capital investment. Your SPENDING = INCOME equation misses the fundamental role of our savings in capital investment. Nor do I believe that Keynesian demand hopscotch plays any fundamental role in economic growth.

          • Posted July 23, 2015 at 10:37 pm | Permalink

            Stephen Berry,

            You are right to point out that growth means rising REAL incomes. Theoretically it should be possible for incomes (wages, salaries, dividend payments etc) to fall and still have economic growth providing that prices fall even faster. I made a similar comment to Edward2 in my reply to him, above.

            Of course, if we accept that possibility, and build it into our computer models there suddenly becomes no need for separate countries and separate economies to have separate currencies. Instead of Country A finding that its currency has fallen relative to Country B on the forex markets the computer model says that we’d have exactly the same result if all prices and wages had fallen in country A by exactly the same amount or risen by exactly the same amount in Country B.

            So, if this is the case, why not have a European Common currency? Everything works perfectly in our computer models, so what can possibly go wrong?

            The snag is that us real people in our real economies don’t behave in the way we are supposed to. We don’t happily accept wage cuts when things are tight. Companies don’t reduce their prices to regain market share. Prices and wages may be frozen but they don’t fall. Instead workers are shed and and production is cut back. We end up with economic contraction instead of economic growth when there is the slightest jolt to the system.

            That’s just the way it is. In scientific terms that is what we observe to be true. Therefore any theory which ignores reality is flawed to the extent of being totally useless. We tend to blame politicians for economic problems when they occur but economists must take their share of the blame too. They have committed the cardinal sin, in scientific terms, of thinking that reality should correspond to their intricate theories, when of course it needs to be the other way around.

      • libertarian
        Posted July 23, 2015 at 7:28 am | Permalink

        Stephen Berry

        Absolutely spot on, good post

        • Edward2
          Posted July 23, 2015 at 5:05 pm | Permalink

          I agree Libertarian, an excellent post by Steven Barry.

  7. Posted July 22, 2015 at 6:50 am | Permalink

    It is good to keep looking forward.

  8. JoeSoap
    Posted July 22, 2015 at 7:01 am | Permalink

    One has to wonder about the motivation here – with the Tories our taxes are increasing more than under a Labour government, and spending is increasing at the same rate as Labour would have increased it. Of course the deficit therefore narrows slightly for the time being, but is this really the best way? You are storing up problems for any downturn with mass numbers of potential claimants who have served their 2 months in the UK to be able to claim.

    • Hope
      Posted July 22, 2015 at 4:28 pm | Permalink

      Osborne has followed Darling’s budget plans almost to the letter. There was a fig leaf between the two. JR himself pointed out the lack of spending cuts five years ago. The. Of course the Tories pretended the Lib Dmea were no,ding them back on spending cuts, what is the excuse this time, Osborne forgot his abacus. The EU will not allow him to make cuts in tax in case it reduces the £17 billion it took in 2013!

  9. fedupsoutherner
    Posted July 22, 2015 at 7:17 am | Permalink

    Could the amount it is going up be due to the ever rising number of immigrants coming into the country who are able to claim just about everything going?? Also the tax credits given out to those who hardly do 2 days work a week??? Rents are going up because there is not enough social housing and this will get worse if interest rates go up because people renting out will put up the prices to cover this. The trouble is, Britain has become a give away society with those working the hardest having to pay it all.

  10. agricola
    Posted July 22, 2015 at 7:20 am | Permalink

    No doubt you are factually correct, however as the media might say, don’t let the truth spoil a good story. Parties in opposition tend to interpret data to suit their own angle on anything. I once remember being on a rather serious mountain rescue in the Lake District during Easter 1958 . The subsequent report written in the Daily Express might have originated from the dark side of the moon for all resemblance it had to the facts. It was probably written in a bar in Patterdale. So much for politics and the media. It is another case of Caveat Emptor.

  11. alan jutson
    Posted July 22, 2015 at 7:43 am | Permalink

    I have to say John that I am amazed that no Minister or so called senior Conservative Politician seem take the same position as yourself when questioned about the deficit.

    Day after day on Daily Politics and other like programmes, your Party Mp’s are questioned about the deficit, and extending the time it has taken, and will take, to get he deficit paid off, and time after time they are either evasive or on the defensive.

    Why is it your Party has this almost death wish on publicity, in that it promises painful cuts as a headline but then deliberately fails to deliver, but at the same time refuses to get any positive news out about now deliberately choosing a less severe route to help resolve our problems with less financial pain to the population.

    Why no simple statement when asked:
    You make criticism that the cuts planned were too big.
    Now you now criticise us for cutting less, and extending the time a little with fewer cuts and less pain.

    You simply cannot have it both ways.

    Given the huge amount of waste in Government spending and inefficiency within the system I am sure with the right management attitude, we could have the deficit cleared within the original timescale without any major problems.

    • Mitchel
      Posted July 22, 2015 at 1:09 pm | Permalink

      Waste generates GDP too (but it also tends to generate debt at at least the same rate);with GDP being such a totemic measure the government would have to find some more productive activity to replace the waste to stop GDP falling and that’s the problem!

      • alan jutson
        Posted July 22, 2015 at 6:37 pm | Permalink

        Mitchel

        The EU increased GDP for all Nations at a stroke when they included prostitution and drug dealing a while back, hence the need for us to pay more in our contributions to them, as it would seem we are quite successful at that.

        So perhaps we could include some other crimes to make up for the additional loss of some Government waste and better efficiency.

  12. Brian Tomkinson
    Posted July 22, 2015 at 7:44 am | Permalink

    I have made the point before, but clearly it needs repeating, that Osborne himself encourages the misconception and has done since becoming Chancellor in 2010.

    • Hope
      Posted July 22, 2015 at 4:53 pm | Permalink

      Not o lay encouraged but claimed the structural deficit would e balanced by 2015 it is now 2020 and no sane person believes him. He now says he will continue to make cuts at the same pace as the last parliament, does this mean the UK will have a deficit of £90 billion by 2020 as he does at the moment? What will the entire be?£3 trillion?

      Reply The government published all their plans and forecasts in the budget, which show a surplus in 2019-20, with a diminishing deficit in the intervening years

      • Hope
        Posted July 23, 2015 at 12:32 pm | Permalink

        The govt did, but there are a lot of commentators, much better informed then me, that do not believe Osborne. Why would they, he made false claims before about the deficit, included Debt as a proportion of GDP when this was not what he pledged. Let us not place too much credibility on what Osborne claims when his record is so poor on delivering. I am still waiting for those 80/20 split in taxation and spending cuts. You keep citing that public spending is going up, when is Cameron and Osborne going to actually deliver on what they say?

  13. rick hamilton
    Posted July 22, 2015 at 7:55 am | Permalink

    Who needs the Labour party when the Conservatives are better at socialism than they are?

  14. Richard1
    Posted July 22, 2015 at 8:02 am | Permalink

    So Labour Party members seem to be concluding that the problem with ed Miliband is he wasn’t left wing enough, and are set to replace him as their candidate for prime minister with a humourless Marxist who speaks of terrorist organisations such as Hamas and Hizbollah as his ‘friends’ and believes in soviet style economic planning. A syriza for the UK in fact. ‘lol’ as a teenager might say.

  15. Mike Stallard
    Posted July 22, 2015 at 8:17 am | Permalink

    Mr Redwood, as far as I can tell yours is the only blog which is actually telling the truth about public spending. Unions yelling about austerity and the Labour Blogs whining about more and more hand-outs and give-aways – all, mind you, totally compassionate and necessary – use the word AUSTERITY and CUTS as a sort of Allahu Akbar.
    I want to congratulate you. Well noticed.

    • Hope
      Posted July 22, 2015 at 4:30 pm | Permalink

      Michael Meacher MP is good on budget figures and fallacy Osborne tries to create with the deficit and debt.

  16. Hope
    Posted July 22, 2015 at 8:18 am | Permalink

    As I wrote yesterday:
    Hope
    Posted July 21, 2015 at 2:20 pm | Permalink
    Brokenshaw’s recommendation preventing criminals entering the UK did not extend to those from the EU? A bit of a flaw I suggest and links to this blog as well.

    Still no apology for last weeks fiasco that the UK will not be involved in Eurozone bail outs. I presume Osborne and Cameron have moved on to this week’s broken promises. I note the UK is running the second largest deficit to Japan than any other OECD country. Where are these 80/20 splits? Could the £2 billion from overseas aid given to the EU to spend (EDF) on trampalining, finding fish mates, dancing, third world dictator bank accounts be reclaimed? Do Cameron and Osborne have the courage to ask their EU masters? Or instead will they demand cuts to our public services, increase our taxes to pay for their madness, and perhaps a larger pay increase for MPs? Gordon come back, you were sane compared to these two!

    Reply The EU text confirmed the UK will be indemnified in the event of loss from the Greek loan.

    • Denis Cooper
      Posted July 22, 2015 at 9:47 am | Permalink

      Which is an illegal, rather than legally binding, agreement.

      • Hope
        Posted July 22, 2015 at 4:37 pm | Permalink

        JR, Cameron was clear he got us out of the Eurozone bail outs, not at all. Osborne claimed before he went in the meeting the UK will not be involved and left in silence, as he remains. No weasel get out clause the matter will be decided by QMV. Cameron did not say anything about idem idyl night UK. He slammed Gordon Brown and claimed he got us out. He has not and did not. He now needs to make a public open apology to the public for making false claims in typical Blaire style all fanfare and no substance.

        Re[ly The EU has issued text indemnifying the UK against any Greek loan loss.

        • matthu
          Posted July 22, 2015 at 7:51 pm | Permalink

          Why should the British believe anything that is not part of a treaty?

          Why should we believe anything at all held out by the people who were negotiating with Greece? After all, it was they who swore that a No vote would mean exit from the Euro.

          They simply cannot be trusted.

          And that goes for Cameron too: far too many cast iron promises turned to rust.

        • Posted July 26, 2015 at 2:43 am | Permalink

          I don’t understand why the EU needs money from the UK. They can create as many euros as they like via the ECB.

          Why do they need ££ from the UK? Especially as they are “indemnifying” against UK losses. It makes no economic sense.

    • Anonymous
      Posted July 22, 2015 at 10:34 am | Permalink

      Hope – I agree.

      • Hope
        Posted July 22, 2015 at 4:41 pm | Permalink

        JR appears confused. The EU breaks it alleged agreement with Cameron that the UK will not be involved in the ESFM and then accepts they will keep to another agreement for the UK not to pay! The UK also being on the hook through the IMF, again Cameron claimed the UK would not be involved directly or indirectly. Which part of his claim is true? Why was the UK on the hook for Portuagal and Ireland? You cannot believe a word Cameron says.

        Osborne needs to apologise his words lasted less than a day!

        Reply The original EFSM loans which the UK is party to occurred under Labour. On taking office the UK declined to join EU loans to Ireland, and made a bilateral loan, making the point that Ireland was a special case and the UK wished to establish the precedent that we did not join in EU loans to Euro area countries.

        • matthu
          Posted July 22, 2015 at 7:55 pm | Permalink

          “the UK declined to join EU loans to Ireland, and made a bilateral loan”

          The obfuscation is blinding. Just like most of the text in most of the EU treaties: the intention is to deceive the electorate, no more, no less.

          Same as talking about the country bringing down its debt.

          Reply THis was all made clear to Parliament at the time in a statement – I remember arguing for no loan

          • Hope
            Posted July 23, 2015 at 12:37 pm | Permalink

            The loan was indirectly helping to bail out a Eurozone country. Cameron claimed he would not do this. He and you cannot have it both ways. A bit like Ireland fighting to be free from this country then wanting special treatment. Get real. It w a deceptive way to help bail out a Eurozone country.

  17. Iain Gill
    Posted July 22, 2015 at 8:31 am | Permalink

    Re “how much we are currently spending and why it is going up” because the incentives are all in the wrong place. No incentive to save and look after yourself in the lean times, all that mean testing superficially saves money but in practise stops people looking after themselves. Housing subsidy being tied to the house you are in, and no chance of keeping it if you move closer to the jobs market. No choice of school, and if you do opt for a different school then you loose your school bus pass, forcing people to go to sink schools, and become unemployable. Floods of uncontrolled immigration, both legal and illegal. Is this not all obvious?

    • Narrow Shoulders
      Posted July 23, 2015 at 6:57 am | Permalink

      This sums up the situation well.

      Look after the very well off (cheap immigrant labour and tax credits), buy off the plebs and increase their base and reliance and keep the middle in servitude by threatening what little they have. Keep them too busy to rise up.

      Seems it is working well

  18. Atlas
    Posted July 22, 2015 at 8:37 am | Permalink

    Since the BBC is part of the Establishment and hence its spending, perhaps John, you could could infrom us if you have a view on its argument about closing down its analogue radio transmitters so as to save money? It is unfortunate that the digital audio broacasting (DAB) method that the BBC wants us to have to use in the future does not work well unless you are close to the transmitter. In comparison, the current FM and AM radio work well, as car drivers especially will testify.

    Reply I do not have a detailed view on the BBC budget as I have not studied it. I do find the interruptions to digital service on my car radio frustrating, and a deterioration compared with the old fm service I used to use on older car radios.

    • fedupsoutherner
      Posted July 22, 2015 at 11:52 am | Permalink

      I can get DAB and FM on my car radio and without it I would be stumped. FM simply works whereas DAB doesn’t. I don’t get hardly a minute without the transmission being interrupted or going completely!! Same as mobile phones in SW Scotland – rubbish signals. Can’t hold a decent conversation in the car (not while driving) and travel at the same time. We keep losing the signal.
      All very wearisome. We hear about people in cities getting faster broadband and yet we can’t even get 0.5 !!! We pay the same as everyone else though.

      • Narrow Shoulders
        Posted July 23, 2015 at 7:01 am | Permalink

        It does seem to depend on the receiver. I have three radios which receive DAB in my house two of which get patchy reception and one which is always clear as a bell. Discussions with the manufacturers suggest it is to do with the way the aerial is connected and is reflected in the price.

        • Narrow Shoulders
          Posted July 23, 2015 at 7:03 am | Permalink

          @Fedup

          “We pay the same”

          Not as an aggregate for the size of area you don’t I am afraid. You can not complain about subsidies and then call for them when it suits you (:

    • Lifelogic
      Posted July 22, 2015 at 6:48 pm | Permalink

      DAB radios are absurd and eat batteries. They were always daft but were endlessly pushed (and advertised on & by the BBC using tax payers money one assumes). They are now outdated technology anyway, this as we have podcasts, 4g and wifi instead.

      The reception is just too patchy, intermittent & poor, as any decent engineer could have told them.

  19. a-tracy
    Posted July 22, 2015 at 8:53 am | Permalink

    Look to your own MPs John, if the others get more media opportunities why? When we have balanced news outlets like the BBC, so every time your MPs see the opposite agenda being publicised ask our even handed broadcaster for a right to reply with the correct figures. I watch C4 news every night they don’t represent the financial position like this at all.

    • Sean
      Posted July 22, 2015 at 2:41 pm | Permalink

      All British TV media is Liberal I’m afraid.

  20. Denis Cooper
    Posted July 22, 2015 at 8:56 am | Permalink

    The problem with having such a soft landing, with such a shallow angle of descent, is that we may not have even touched down before we reach the end of the runway … in other words, there is an economic cycle and there will be another recession, and at this rate it may well hit before we have properly recovered from the last one.

  21. Hope
    Posted July 22, 2015 at 9:10 am | Permalink

    JR, The ONS claims the UK paid £17 billion to the EU in 2013, not counting, proportion of overseas aid (£2 billion), extra demands, free public services, housing and fines imposed by the EU.

    Could you clarify if this is correct. It is not beyond the wit of most people that every penny comes from UK taxpayers’ pockets. it is also clear that this money could be used on the people who provide it, namely UK citizens.

    Moreover, is Cameron capable of understanding that if he artificially increases the UK population by his mass immigration policy that public spending will need to increase? Six years ago you pointed out that public spending was increasing and not being cut as politicos and your party claimed. over 500 tax increases and increases in public spending and Cameron still spouts he is a low tax conservative! Do you raise this with the 1922 committee as reasons why Cameron must walk?

    • acorn
      Posted July 22, 2015 at 4:14 pm | Permalink

      I have UK net payment to the EU for 2013 at £11.27 billion. £19.38 billion into the EU and £8.11 billion came out. These numbers will keep being amended for years under the retro procedures.

  22. CHRISTOPHER HOUSTON
    Posted July 22, 2015 at 9:11 am | Permalink

    Such good but general news in Silly Season is unlikely to reach the front pages of a press which has lost 7.5% of its circulation this year. Unless Rt Hon Mr Osborne cites these figures simultaneously announcing he keeps a pet baby llama in his bath who he intends one day to marry when it is old enough to know what it is doing then such good news will inevitably fall on stony ground.

  23. Denis Cooper
    Posted July 22, 2015 at 9:53 am | Permalink

    Off-topic, JR, and I daresay that you will be writing about it separately, but I have read yesterday’s debate here:

    http://www.publications.parliament.uk/pa/cm201516/cmhansrd/cm150721/halltext/150721h0002.htm

    and I do not agree that we should just stand aside and let the eurofanatics do as they want on the basis that we are not in the euro and have no present intention to join the euro. Perhaps you could say how long you think we could stay outside the euro once every other country in Europe had adopted it, in line with THEIR intentions?

    Reply I have already written about this on the site. I will post the debate for others to read. I will be writing more about the moves to greater EU integration next week.

  24. waramess
    Posted July 22, 2015 at 10:04 am | Permalink

    One clearly needs to stay wide awake these days.

    No sooner has Osborne managed to garner credibility for his cuts than we find all accolades are off the table because spending is actually up.

    The Conservatives should stop worrying about the press and the socialists; we know full well what their position is on austerity and hopefully the Conservatives disagree. If they do not then somebody is trying to deceive the electorate.

    Maybe UKIP is not “done for” after all.

  25. acorn
    Posted July 22, 2015 at 10:15 am | Permalink

    Don’t get carried away JR, Real Net National Disposable Income per Capita, is still nearly 4% below its 2008 level. The numbers in “Public Sector Finances, June 2015”, would not lead you to believe that there will be a zero-ish deficit in 2019.

    Anyway, owning them Banks is certainly bringing in the cash, the government should be buying some more, not trying to sell them! Have a look at Table 5 in the above. Excluding AND Including the effects of temporary financial interventions. Look at the two PSND columns; see how much has been piled into those Banksters. Makes family tax credits look like small change.

  26. Anonymous
    Posted July 22, 2015 at 10:26 am | Permalink

    Working Tax Credits were meant to be an incentive to get our own unemployed back to work – not to act as a draw to the poor of Europe and those who claim to be European.

    Of course welfare is going up. You only have to watch the programme How to Get a Council House to see the loonacy of imported low wage workers bringing their families here, doubling their basic income with welfare and getting council accommodation.

    If this is a boom then what will welfare a dip look like ?

    • Narrow Shoulders
      Posted July 23, 2015 at 7:07 am | Permalink

      Ah yes the draw from abroad of tax credits and other in work benefits (housing benefits and schooling for kids.

      The recently noticed elephant in the room

  27. Ex-expat Colin
    Posted July 22, 2015 at 10:40 am | Permalink

    I suspect we can thank the BBC ‘stars’ for HMRC’s interest in contractors. Hardly stars really. Now cut down on the vast Westminster baggage along with the EU of course.

    DAB radio works in my car ok, but as soon as I drive into London its not good at all because I have to switch it off due to the sheer piles of garbage thats on. If you are asking low power VHF transmitters to penetrate at near ground level reliably (add all obstacles)…you are asking a bit much!

    O/T somewhat.

  28. agricola
    Posted July 22, 2015 at 11:04 am | Permalink

    Have at last tracked down a transcript of what was said in Westminster Hall yesterday. It brings us up to date on current thinking within the EU on the path forward for the Eurozone and ultimately the EU.

    In an earlier submission I suggested that all those who question the wisdom of belonging to the EU should combine on one properly coordinated platform irrespective of any basic political affiliations. Divided you are too vulnerable. Tories to be depicted as rebels, UKIP as fruit cakes, and labour doubters as an insignificant minority.

    Possibly the first thing that such a grouping should decide is what our future relation ship with the EU should be. I favour that of an independent sovereign nation that trades freely and cooperates where it is mutually beneficial. Clarity of message is important in terms of what you are trying to sell.

    The Committee or Board of Directors must go way beyond politics to include members from Industry, Education, Finance, Defence and Science. You are then equipped to sell the product on all fronts, and to prick the nonsense arguments that will come from the stay in side.

    You need to appoint a sympathetic PR and Advertising Agency to put your message into a sales worthy form.

    You must also demand equal funding, time on air, and no involvement from the EU, financial or political. The EU already pay the BBC in excess of £1 Million per annum to sell the EU whatever the BBC may say to the contrary. The BBC also borrow large sums from the EU. £141 Million over 11 years at the last count. Question, are they a public funded broadcaster or a commercial organisation or both. They even get grants from Local Authorities.

    When you have clarified all the above you will begin to look like a coherent serious organisation that the referendum voting public can begin to take seriously. When the opposition have not decided what they wish to re-negotiate or how they see our future relationship you have a free fire zone in which to put your case. Just remember that it is the future sovereignty of the United Kingdom you are fighting for, not a political party.

    Reply You have just described the process the NO campaign is going through. How do you intend to help?

    • Posted July 22, 2015 at 11:41 am | Permalink

      “How do you intend to help?”

      Please pass on my details :

      I for one am ready and willing to put some time in working for the No campaign. I am a Conservative, not a UKIP supporter but at the moment UKIP is the only game in town.

    • agricola
      Posted July 22, 2015 at 1:48 pm | Permalink

      Reply to Reply.

      Thank you for confirming I got it just about right. How do I intend to help? By offering my opinion where I think it appropriate, By voting No when the referendum happens. Not being super rich, and at a considerable distance here in southern Spain I cannot go door knocking on behalf of No. I will however engage those out here who can vote to do so . I will add my ten pennyworth to newspaper article I read on the internet as I see fit. If the Euro Lottery works, I will re-define what I can do.

      Reply A referendum is for all men and women of good will and strong views, so please help. It is also about building a coalition of the willing rather than creating tough tests of purity for each voter.

  29. Posted July 22, 2015 at 11:30 am | Permalink

    This just shows how far out of control Brown allowed the welfare system to go when he was Chancellor and PM.

    Even after five years in power and against constant criticism from Labour and the SNP (and at best lukewarm support from Clegg and Co), Osbourne is still a long way from getting it back within reasonable boundaries.

    Thank goodness the Treasury team look like they are at last taking a really sharp axe to public spending. We have an opportunity to make a significant step forward in reducing the size and scope of what the public sector does. Asking Departmental ministers for proposals for 40% reductions gives the Sir Humphries no room to hide. They will have no choice but to undertake some blue sky thinking and come up with completely new ways of working. Not before time.

    However, the sacred cows of the NHS and Foreign Aid should have been included. We know that health service demand will increase significantly but that makes it even more important to have a total rethink how services are paid for and delivered.

    We could make a start by charging no university fees for UK medical students but require them to sign a contract to work in the NHS for a minimum of ten years. The very idea that a student can receive funding to do a medical degree then go abroad to work and never repay their loan is ridiculous.

    As for Foreign Aid. Even a 40% cut is nowhere near enough : I would immediately cut the budget for 2016-2017 in half.

    • Narrow Shoulders
      Posted July 23, 2015 at 7:25 am | Permalink

      We could make the degree 8 years with three years of full time hands on training in hospitals and surgeries for reasonable consideration and no fees for the whole course.

      The doctor could not then qualify without providing services for a time.

  30. stred
    Posted July 22, 2015 at 11:50 am | Permalink

    Public expenditure seems to be increasing in the area of advertising on commercial radio. We have London Transport telling us all the time to look up their website to find out where the jams caused by their Superhighway for bikes is being built, when we know already. And the Highways agency then tells a lady who was fed up with the queues at the Dartford tunnel that they have at last removed the booths- after putting in a computer plate reading system the year before. She is encouraged to take a trip and pay the tolls. Don’t they have enough customers? By the way, there are still queues at busy times.

    Then there are queues of half an hour or more at Stonehenge as motorists take the main road to the Westcountry. But why not spend a billion on more enquiries and a tunnel, which will have to be permanently lit, with power bills. A simple by pass in a cutting would be much too cheap and might only take 2 years to build.

    Then HS2 is a national essential to get to and from the Northern Powerhouse, going faster than the French one and with even higher power bills, perhaps generated by all those Northern offshore wind power stations that have just been ordered at twice the cost of the onshore ones from the Scottish Powerhouse. Or when the wind stops Hinkley Point will drop the rods and keep us going with the most expensive nuclear contract in the world.

    Yes, the Conservative party is the party of financial competence and known for spending taxes wisely, or at least it used to be.

    • Lifelogic
      Posted July 22, 2015 at 6:52 pm | Permalink

      Used to be until John Major destroyed that reputation with his ERM fiasco still no apology. Osborne has certainly not done anywhere near enough to restore that reputation yet.

  31. The Prangwizard
    Posted July 22, 2015 at 11:55 am | Permalink

    Don’t underestimate the influence and intentions of the Hard Left. You were complacent about the SNP, thinking they would become all ‘clubby’ if you were reasonable and gentlemanly and look where that got you.

    • The Prangwizard
      Posted July 22, 2015 at 6:12 pm | Permalink

      And I hope there is a plan for when under Corbyn he does a deal with the SNP.

  32. forthurst
    Posted July 22, 2015 at 12:00 pm | Permalink

    How can there be proper control of public spending and appropriate allocation of public finance when much of government expenditure is ring-fenced and some is allocated to fund EU-sponsored white elephants?

    Foreign Aid provides no value for money for taxpayers since the claim that it prevents more thirdworlders attempting to immigrate is a bare-faced lie of the sort that flows too glibly from politicians’ lips.

    Education and the NHS are also ring-fenced, so like Foreign Aid, they are not subject to pressure to provide value-for-money. Consequently, some underperforming departments are being subject to swingeing cuts which will cause them, particularly the Home Office, to increasing malperformance. On the other hand, Defence suddenly gets a massive increase in its budgets, for a department not noted for its capacity to spend money wisely.

    My local health services are not infrequently in the local news for reasons which would not provide reassurance to either patients or taxpayers: malperformance by over-remunerated administrators leading to large numbers of agency nurses being hired for single shifts, particularly at weakends, the removal of the Senior Registrar recently-appointed to sort out a malperforming department which by implication was damaging patients survivals, removed for alleged thoughtcrime (hurt feelings of underperformers). A local GP practice of ten thousand patients has been subject to compulsory closure following one of the two senior partners(words left out ed) being put under severe practice restrictions by the GMC and thereby forced to leave.

    Running the public services properly and efficiently is more than just about budgets, it is also about what they do and why and how they do it; private industry, apart from banksters, constantly has to look to improve performance whilst controlling costs; shouldn’t public services be the same?

  33. Posted July 22, 2015 at 12:21 pm | Permalink

    Bring back the Tories. They’ll cut the deficit.

  34. Posted July 22, 2015 at 3:53 pm | Permalink

    I see we have a new ally in the cause of an English Parliament. Labour’s Chuka Umunna is calling for a federal structure that is supportive of England as one unit and an English-only Labour Party.

    Of course, it’s only based on Labour’s own self interest : he’s the only member who has publically recognised that they cannot win a General Election unless they are broadly facing to the right in England and simultaneously flying the red flag in Scotland.

    A Federal UK and Labour structure would appear to be the only way round that particular problem.

  35. Hefner
    Posted July 22, 2015 at 6:22 pm | Permalink

    OT:
    A government of cowards: the Government after having asked a report from experts about the use of neonicotinoids and the damage to bee colonies in the UK has prevented his experts to report publicly, has discarded the report and has used the last session of Parliament to allow the use of these products.
    Well done, guys and gals …
    Really brilliant, the UK democracy.

  36. Posted July 22, 2015 at 9:11 pm | Permalink

    “The deficit came down a bit, thanks to revenue growing at a lively 4.4%”

    Well, yes, if the economy is growing then revenue will rise and the deficit will fall. Even if the deficit doesn’t fall there’s no problem because a healthy economy will attract foreigners who wish to park their money in the UK.

    We don’t want the government’s deficit to fall too much, if at all, when there is a trade deficit, that other deficit which is largely forgotten about, of about 5.5% of GDP. If the government’s budget deficit is any less than 5.5% of GDP it must mean that there is a reducing amount of spending money in the general economy.

    That will, sooner or later, produce a new slump. We’re pretty close to that. My tip for anyone who has done well from share and property purchases in the last few years would be to quit now while they are still ahead.

    Reply Silly comment – some of the most successful economies have zero government deficits.

    • Posted July 23, 2015 at 8:30 am | Permalink

      Reply to Reply,

      And have a 5.5% trade deficit?

      Germany has a balanced budget but it needs to run a trade surplus of 7% to be able to do that.

  37. Ken Moore
    Posted July 22, 2015 at 9:36 pm | Permalink

    It’s not remarkable that the most left wing Conservative government in living memory is presiding over a rise in spending. Maintaining Mr Cameron’s self righteousness has always been more important than the long term national interest.

    The ‘Conservatives’ should be prosecuted under the rules concerning misrepresentation of goods – they have ceased to be Conservative and have become a mush of political correctness and Tony Blair inspired babble talk.

    I’d still like to know where Mr |Redwood stands – is overall spending too low, about right or too high ?.

    Reply I would spend less, and have often said what I would spend less on, starting with the EU contributions.

  38. A different Simon
    Posted July 22, 2015 at 10:46 pm | Permalink

    All that making benefit payments to over 8 out of 10 families has achieved is to cause the cost of living to rise ; especially accommodation – the MP’s favourite investment for some reason .

    John , even you said that you wanted UK wages to rise . They are already 3-5 times those in the developing world and it’s still not enough to pay landlords .

    My wages are 8% lower that they were 8 years ago and I’m going to have to reduce my prices further if the pound strengthens further .

    What advice do you have for us exporters who seem to be falling further and further behind those who work in the domestic economy ?

    At least there is one person in the cabinet who seems to have realised that Britain is pricing itself out of the market – Osborne .

    Reply I said I want higher wages backed by smarter working. When I have in the past led companies that export I have sought prices that allowed us to make money by offering products that were worth good prices.

    • Posted July 24, 2015 at 10:50 pm | Permalink

      “What advice do you have for us exporters who seem to be falling further and further behind those who work in the domestic economy ?”

      The simple answer is to work in the domestic economy too!

      There are three policy choices for the UK government re its exporters and importers.

      1) Net buy (ie buy more than sell) the bonds issued by the governments of our trading partners. All net exporters with their own currencies (Denmark, Switzerland, Singapore etc) do this. This would put more ££ into the hands of our overseas customers which means they can buy more stuff from us than we buy from them.

      2) Net sell the bonds (gilts) issued by the UK to our trading partners. All net importers with their own currencies (UK, USA) do this. This puts more ££ into the hands of domestic customers which means we can buy more stuff from them than we sell to them.

      3) Neither net sell nor net buy. Trade then has to balance.

      There are arguments, for and against, all three options. The UK govt has, rightly or wrongly, chosen option 2. The net sale of those bonds also impacts on the governments budget deficit, penny for penny, which is why I do keep harping on about not ignoring trade deficits when considering budget deficits.

  39. Narrow Shoulders
    Posted July 23, 2015 at 5:34 pm | Permalink

    Anthony Hilton has a full page op ed piece in tonight’s Standard highlighting the illusion of austerity and Mr Osborne’s fixation with wrong footing Labour rather than taking the tough economic decisions.

    Standard.co.uk/comment

  40. Posted July 23, 2015 at 10:51 pm | Permalink

    Is all this a confession or a boast?

    The 3.6% increase in welfare benefits at a time of falling unemployment suggests that in work benefits – notably tax credits – were starting to get out of control. Conservatives should not object to tax credits in principle – after all, ‘negative income tax’ used to be a right wing idea – but the Chancellor has been right to scale them back.

    The overall increase in public expenditure of 2.9% has been just about acceptable, provided that it only happens for one year.

    The 4.4% increase in tax receipts, in combination with the rise in wages, suggests that the party is about to get into full swing. The Bank of England MPC is wisely considering taking away the punch bowl.

    One worrying feature is that the Chancellor is beginning to dump the cost of Government social objectives onto employers. The BBC is being asked to finance the cost of free TV licences for the over 75s. The advent of the ‘national living wage’ implies that the government knows better than employers what the price of labour should be. When 30 hours of free child care is introduced in 2017, will the government fully finance it or ask employers to pick up some of the tab?

    Why should government finance child care at all? The decision of ‘economic woman’ would be to work if, and only if, her take home pay exceeded her child care costs. Why should any government wish to skew that decision? It seems that all governments – even Tory ones – cannot resist meddling in private matters.

    Finally, a moan about taxation policy. The Conservative Party is committed not to increase income tax, corporation tax and VAT. However, it has raised taxation by £25 billion net in the July budget. To do this, it has had to introduce a raft of new ‘stealth’ taxes – e.g. insurance premium tax, bank profits levy etc. Every new tax necessitates more bureaucrats on the public payroll to collect and administer it. It’s a move in the wrong direction.

    • Posted July 25, 2015 at 9:07 pm | Permalink

      “Why should government finance child care at all”

      We can also ask why government should finance children’s education? Or children’s health care?

      We tend to forget that those children will pay our pensions in the years to come. Pensions, whether public or private sector funded, are essentially just a collection of government IOUs. Those IOUs will only be worth what the future economy can support. The real things that we will consume in our old age ie the food we eat, the health care we will receive, even cars we will drive, don’t exist right now. They’ll be created by the next generation.

      So we’ll be relying on them just as much as any previous generation relied on their young people. Pensions don’t change a thing in that respect.

      It’s in our interests to look after that generation as best we can right now.

  • 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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