UK public finances are OK

The latest figures for public spending, tax revenue and borrowing published yesterday showed more progress in reducing the running deficit.  Total state borrowing adjusted for the bonds the Bank of England has bought in remains at a moderate level, around 65% of GDP.

The main reason new  borrowing is reducing is the continued good growth in tax receipts. In the period April 2016 to January 2017 tax revenues were 5% higher than in the same period of the previous financial year. This reflects the continued growth of the UK economy. Self assessment income tax receipts and corporation tax receipts showed especially strong growth based on improved business activity and investment prospects.

This increase in tax allowed an increase of 2% in public spending and a reduction in the rate of new borrowing. In the financial year to date central government current spending is up by 1.4% and local government current spending up by 10.2%.  Central government net investment rose by 6%.  (ONS official figures). There are some areas where it may be necessary to spend more.

It is still a good idea to spend  money wisely. Ending our EU contributions  is an obvious improvement to make. There are issues with poor value for money in parts of the overseas aid budget. There are  more opportunities to help people into work, to cut the benefit bill by substituting earnings from work. There are many efficiency improvements to be made in areas like railway spending, which is running at high levels.

The government also  needs to be careful over tax rates. Taxing income may be a necessity, but it is not wise to tax working and investing too heavily as it can do considerable economic damage and prove self defeating. The budget is an ideal time to review current rates and ask which taxes should be lower in order to raise more revenue as and when economic growth delivers more cash.

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26 Comments

  1. Duncan
    Posted February 22, 2017 at 6:40 am | Permalink

    As ever it’s far too easy for the State spend someone else’s money without any sense of limits or concern.

    Politicians when in government have zero desire to confront the State’s various vested interests who continually push for budget increases almost on a daily basis using various propaganda tactics. The tiresome tactic of the NHS of using winter time to whip up another A & E crisis in an attempt to apply political pressure for spending increases is a classic example of ‘crisis contrivance’.

    The private sector is now completely abused to finance the inflexibility and privileges of the public sector which has become nothing more than a generous employer rather than a provider of services to the public

    Mr Redwood appears oblivious to the dangers of successive UK governments who refuse to reform the entire panoply of the State for fear of negative political headlines. A point will be reached when a culture is so embedded in which efficiencies and reform are impossible to impose. That will lead to State bankruptcy with the private person being targeted even more aggressively for their assets rather than cuts in spending

  2. Newmania
    Posted February 22, 2017 at 6:52 am | Permalink

    No-one outside Mr Redwoods Office For Budgetary Irresponsibility is yet suggesting that, in Mugabe style, we simply print money and pretend we didn`t . In fact, since Brexit, our forecast debt summit of around 80% of GDP has been upped to 90% by the OBR (going with the old counting method).

    The Conservative Manifesto of 2010 pledged “a credible plan to eliminate the bulk of the structural deficit over a Parliament”.(…stop laughing ! …) George Osborne was only able to halve it (measured as a proportion of GDP). The I F S believes that Hammond will also fall short having ditched Osbourne’s plan. The tax burden, meanwhile is due to reach its highest level for 30 years and the engineered consumer boom is now ending . This paying back debt ..its not optional you know !
    In the real world you will see what you have already seen .Stealthy tax rises business rates, IPT et al as well as cuts shoved down the line to Councils quangos and anyone else to take the blame. Numerous Hospital closers are, for example, already scheduled to close
    When National Debt was 38% in 2005, Mr Redwood was horrified! He had ever so many bold plans cuts in mind for curtailing the outrageous burden placed on the future and the present. Perhaps he had been brainwashed by the European Union (they are to blame for austerity you know …)

    Laugh … though your heart is breaking….. laugh….

  3. Nig l
    Posted February 22, 2017 at 6:54 am | Permalink

    We are still reading about massive waste in areas such as procurement especially defence and the NHS, billions are being talked about, the Civil Service has too many layers of management etc. In the 21st century this is nonsense. The government should have a minister at cabinet level from a business background to sort this and I suspect, firstly, get rid of the vested interests that are part of this problem.

    • Mitchel
      Posted February 22, 2017 at 1:34 pm | Permalink

      They are all in it together,so who is going to cast the first stone-or even strike the first match for that bonfire of the quangos?The neo-feudal charade continues.

  4. eeyore
    Posted February 22, 2017 at 7:28 am | Permalink

    I hope the much-criticised overseas aid budget will run to generous famine relief in South Sudan. It is, we are told, the first famine in the world for six years.

    Older readers will remember when there seemed always to be a famine somewhere in the world. I suspect this is the first time in the whole of human history that six years have passed without one. If so, it is astonishing, and a genuine triumph for capitalism, globalisation, science and humanity.

  5. Sir Joe Soap
    Posted February 22, 2017 at 7:49 am | Permalink

    Tax more, spend more.
    The LibLabCon way.

  6. Narrow Shoulders
    Posted February 22, 2017 at 8:03 am | Permalink

    An axe could be taken to much government spending.

    It is illuminating that receipts are up 5% but we are still borrowing. Where does it stop, why must HM Government be so pervasive?

  7. agricola
    Posted February 22, 2017 at 8:07 am | Permalink

    Okay we are keeping our noses above water, but only just. If I had a two trillion overdraft my bank manager would be in intensive care by now. The key will be how we handle the transit from pre Brexit to post Brexit. Plan for the worst scenario and hope for the best. Having said that I would not change a thing in terms of returning to being a sovereign nation.

    Reply We don’t have a £2 tn overdraft! We have a £1.2tn well funded debt at low interest rates.

    • Tad Davison
      Posted February 22, 2017 at 10:23 am | Permalink

      Reply to reply:

      But we still have massive levels of state and personal debt. And the worrying thing is, if the banks get themselves and everybody else into trouble again, as well they might, it will be a catastrophe the like of which we have never seen before.

      It is difficult to see a way back from that scenario, so it is equally difficult to see how our finances can be described as being OK when the same crooks and spivs are at liberty to do as they please, although we would at least potentially have a way out of the mire once we have fully extricated ourselves from the EU.

      Tad

    • ian wragg
      Posted February 22, 2017 at 11:00 am | Permalink

      Yes, a ZIRP policy that is stealing from savers to finance Brussels and Overseas Aid.
      Inflation is rising and by any measure interest rates should be rising but the government wants to steal all our savings to continue paying in work benefits to foreigners and wasting money on HS2 and the like.

    • Hope
      Posted February 22, 2017 at 11:07 am | Permalink

      JR, do not be ridiculous. What is the deficit if it is not a type of overdraft, namely spending more than you earn? The debt is £1.6 trillion and rising! Moreover, this was promised as the Tory Govt central theme to the alleged economic plan to balance the structural deficit by May 2015. The promise has now been abandoned. At least be fair and balanced in recognising the massive broken promise that your party held up to get elected on. Your reply even tries to conflate deficit and debt. We already had the lies from Cameron and Osborne in trying to change the goal posts that its slight reduction was related to GDP when this was never mentioned in the original promise. Think about your other blogs of fake news and confidence in politicians when replying like this.

      Reply I never confuse debt and deficit. We have a sensible level of state debt, with a good average duration.

  8. Mark B
    Posted February 22, 2017 at 8:09 am | Permalink

    Good morning.

    The main reason new borrowing is reducing is the continued good growth in tax receipts.

    So, we have another ‘Chancer’ of the Exchequer who has never heard of the, Laffer Curve.

  9. Richard1
    Posted February 22, 2017 at 8:13 am | Permalink

    If the EU really is in a position to extort £50bn from UK taxpayers as a fee for leaving, then it is presumably best for the government to say now that there will be no negotiation, we will leave right away and go to WTO rules. Then leave, and it will be up to the EU as to whether to impose tariffs etc and make the next move.

    • Richard1
      Posted February 22, 2017 at 8:17 am | Permalink

      If there is any validity to this claim we are entitled to ask why it wasn’t raised during the referendum campaign – Project Fear would surely have latched onto it. The fact that it wasn’t shows it is a try-on.

      • Denis Cooper
        Posted February 22, 2017 at 11:32 am | Permalink

        It would have been a double-edged sword.

    • Know-dice
      Posted February 22, 2017 at 10:51 am | Permalink

      Well if we do pay anything (you know how incompetent our civil servants and their masters are) then we expect to benefit from that spending, we would also expect to take “advantage” of our current membership rights including and not limited to access to the Internal Market.

      As far as pensions go, Juncker said to EU employees (I paraphrase) “you hang your national hat at the door as you enter”. i.e. you are an EU employee now and do what we (the EU) tell you. Therefore it has been totally the responsibility of the EU to ensure that pension provisions were put in place at the time of employment, not to come creeping along afterwards….

    • Denis Cooper
      Posted February 22, 2017 at 11:31 am | Permalink

      It’s not a fee for leaving, it’s part of the cost of having joined in the first place.

      Surely the test question must be: “Could we have avoided paying this money if we had voted to stay in the EU?” And the answer is “No”, because we would be paying it anyway over the coming years, and much much more besides in perpetuity.

      Reply There is no need to pay an exit fee! Why are people so gloomy just because the Commission would like us to?

      • Denis Cooper
        Posted February 22, 2017 at 12:52 pm | Permalink

        That’s missing the point that even if we stayed in the EU we would still be paying it into the EU budget year after year.

  10. alan jutson
    Posted February 22, 2017 at 8:41 am | Permalink

    Funny how so called Austerity is shown up now to be increased spending !

    So we have a failure of policy to eliminate the deficit quickly enough, The Government are spending more than ever, but we have an austerity policy imposed upon us which is highlighted by cuts.

    No wonder people are confused.

    Perhaps the Government should get its message across in a rather clearer manner.

  11. Bert Young
    Posted February 22, 2017 at 8:53 am | Permalink

    Very sensible views in your blog today John . Hammond does have a bit of leeway now in his budget so I hope he won’t make a mess of it . There are priorities to be met and the state of the NHS shows that diverting things like overseas aid would be a good thing to do . I have always been a believer in lowering business taxes ; revenues have always increased whenever this approach was adopted.

  12. margaret
    Posted February 22, 2017 at 8:57 am | Permalink

    Good tax receipts .. I know what you mean .. I heard yesterday that any new money to be spent on the NHS will go towards reducing the deficit .. Is this true ? I may offer to run a ward or wards myself using charity money ?! I have done almost the same before.

  13. Richard1
    Posted February 22, 2017 at 9:18 am | Permalink

    Receipts from income tax, CGT and corporation tax up, though the rates are down. Receipts from stamp duty dramatically down following Osborne’s huge hike in rates. Can there be any leftists out there who still deny the Laffer Curve?!

  14. NHSGP
    Posted February 22, 2017 at 11:30 am | Permalink

    The deficit in the NHS pension scheme alone went up by over 53 bn.

    As at 31 March 2014 the pension liabilities of the Scheme were valued at £337.2 billion. This is an increase of £53.0 billion from the liabilities at 31 March 2013 of £284.2 billion

    http://www.nhsbsa.nhs.uk/Documents/Pensions/Resource_Accounts_2013-2014.pdf

    I don’t understand why you exclude that number from the deficit.

  15. Antisthenes
    Posted February 22, 2017 at 11:54 am | Permalink

    Tax and regulation is spiralling out of control due to to the purpose of both being expanded to satisfy every vested interest’s demands. The left wing groups demands being the most expensive and pernicious. Social justice in it’s many guises being the favoured reason for making a demand and of course the most difficult to refuse as who would wish to be known as uncaring and callous.

    However when a point is reached that makes those demands already met unsustainable and untenable and yet the demands keep coming action has to be taken to correct the situation. Actions that do not find favour with many as it removes or reduces rights and privileges injudiciously conferred. The fact that it is due to economic necessity after a long period of economic imprudence and excess does not impress at all. The mantra “What do we want……… When do we want it. Now.” does not readily leave the lips. Made worse by the fact that the transition from bloated to slim makes for poorer services as change is resisted and new more efficient work practices slow to be implemented. The charge being that it is lack of funds not poor workmanship to blame.

  16. ian
    Posted February 22, 2017 at 2:14 pm | Permalink

    All they do every year is change the way things are calculated by the ONS and keep 3 budget books and the off sheet book and the PFI books, well you only get to see one book and that’s whole numbers you never get a full breakdown and they do not tell you anymore what they have sold off.

    It the NHS budget were they are running a deficit every year now, they roll it over each year into the next year and it keep growing and then say they need more cuts instead paying off the debt to make out to you that these cuts are really needed also like the treasury they altered the way they calculated things and making out they are doing a lot more work, they cut 15,000 bed since 2010 and are going to cut another 3,000 beds this year so i ask you how can you be doing more work with less beds which is making waiting list in time and numbers grow to a all time high and then if you have less beds in hospitals what are they doing with all the extra staff in the hospitals, it just dose not ring true to me, the only crisis in the NHS and social care is the one they are making themselves for the public news, you never hear of these things in europe apart from greece, over 30,000 avoidable deaths in the uk in the last year and that only what they want to tell you about in the news.

  17. behindthefrogs
    Posted February 22, 2017 at 3:55 pm | Permalink

    If there is money available to reduce taxes after the problems with the NHS have been sorted then it should be used to raise the lower limits of NI contributions for both employers and employees. It is disgrace that people earning minimum wage should be taxed using NI contributions

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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