There was some good news in the September figures for public spending and borrowing. So far this financial year spending is only up 3%, a bit below the forecast. Meanwhile tax revenues are up 5%, usefully ahead of costs, even though they are down on forecast. Between April and September this year the government added £54 billion to total state borrowing, down £3.4 billion on the same period in 2010-11.
The Treasury tells us this means we are on track. The government should they say be able to limit additional borrowing to £122 billion for 2011-12, compared with £137 billion in the previous year. The government needs to redouble its efforts to explain to people that it is only trying to cut the growth rate in borrowing. It is not in the business of paying back debt. The pace of planned deficit reduction is quite slow in years one and two of the plan.
The more worrying figure was the Public Sector Net cash Requirement, which came in at £19.9 billion. The Treasury says not to worry. This was inflated apparently by interest payments on the debt. It is still cash outflow, and those interest payments are going to continue to rise, as the government continues to borrow more.
Over the year to June 2011 the number of public sector employees fell by 240,000, whilst the number of private sector employees rose by 264,000. The consolidated debt figure of £2.3 trillion which includes the state owned banks is still very high. It argues for the UK government to find ways of shedding more of its banking assets and liabilities. That is the quickest option to cut or limit the debt, and to cut the risks taxpayers are still running by owning these companies.
October 23, 2011
Well at least the number of public sector workers actually fell. Indeed some plan to sell off the banking assets is needed and hopefully get them working as lending banks again at the same time. Further improvements can be made just by a big reduction in regulations. The absurd rules that create pointless jobs for lawyer others all over the place. Start with the absurd energy performance certificates (make then optional) and the absurd employment laws then move on the millions of others regulations that handicap business in the UK. Of course you need to out of the EU straight jacket to do this.
October 23, 2011
At least I read Cameron is doing one thing that is useful it seems – reported in the Telegraph today.
“David Cameron in new drive to speed up adoption – David Cameron will within days launch a new drive to make adoption simpler”. Hopefully he will fire the many experts and hangers on, who get in the way of this all the time and turn it into an industry. To the huge disadvantage of the children.
He could also look at the listed tree protection industry which is in some ways a parallel pointless job creation industry.
October 23, 2011
And the O.T.T. residents and other parking local authority industry.
October 23, 2011
On parking is it really appropriate to charge people £130 for being a minute late on their pay and display because the was a queue at the bank or their child needed the loo (in Hammersmith & Fulham). Last time I was there it was £60 and even that seemed rather high. Must not help the inflation figures. £130 might be two days take home pay for some people and mean they cannot feed the kids or pay the rent!
Still there is all those huge LEA pension to pay I suppose.
October 23, 2011
Quite right. A £5 fine would be more than adequate. Even a pound a minute!
October 23, 2011
Cameron and Co are out of the stocks doing their best to create a fear campaign of what might happen if the UK left the EU and now is not the time. It was painful to watch the Simon Hughes and his idiotic argument for not having the vote and going against the Lib Dem manifesto that in contrast stated it would have an in out EU vote. Painful, absolutely painful. Any right minded person would not believe a word the Lib Dem MPs say. Wipe them off the political map ASAP.
The opposite is actually true. The Uk needs growth, less bureaucracy and cuts to spending. All of which could be provided by leaving the EU. It is thought it costs UK business £1.8 billion each year in EU regulation and has caused the UK to drop from 7th to 12th in world competitiveness. A good argument why the UK needs the vote on the EU now before we are dragged into further costs and debt.
October 23, 2011
“the absurd employment laws”
Care to elaborate? Do you want to be able to pay people below minimum wage, discriminate against them because of their skin colour, and be able to fire them for being pregnant?
October 23, 2011
I think you should be able to fire anyone you like – if it is not working out. That in fact would be in the interests both of employers and good hardworking employees – as they would not have to carry the rest.
Employers do not, in general, discriminate irrationally it is not in their interests – they just want someone who turns up and does the job well. Be they white, black, disabled, old, young, pregnant or even a machine they do not care if they can do the job.
October 23, 2011
Minimum wage certainly prices some people out of jobs: it may seem a wholly inadequate rate in London, but things are different elsewhere. There is no exploitation when the work done is of lower value. Minimum wage is a poor way to prevent exploitation – much of which happens at the expense of illegal immigrants employed illegally anyway.
I believe that under Harriet Harman’s Equalities Act (shamefully rushed through on the nod before the election) it is now legal to discriminate against white Caucasian British in favour of minorities. That should indeed not be the law.
It really doesn’t seem appropriate to land small time employers with the costs of maternity pay and keeping jobs open. Roughly, the chance of having to face these costs is ~700,000 births over about 12.5 million women of childbearing age, or 6%; or about 2.5% if you relate it to the number of employees in employment. For a small business the cost can be devastating, and even lead to the closure of the business altogether with the loss of other jobs. A large business can plan more easily, because their cost will not vary too greatly from one year to the next. If it is deemed societally desirable to pay prospective/recent mothers while they are not working (which might be questioned for those who seem to use pregnancy to play the system for benefits and housing), and to offer them their old job back later regardless, then it should be insurable, and paid out of taxes (or printed money). Of course, for employees of the state that is exactly what happens anyway. But bureaucrats often display total ignorance of the practicalities of private sector business.
October 23, 2011
unanime5
Its a sad fact of life that when running a small business you have to consider costs, and how possible staff shortage for a period of time, and having to possibly employ a temp (and train them for a short term period) would interact with other staff members and the efficient overall running of a business.
When a choice comes between employing someone who could become pregnant, someone who probably would not, who would you favour, given both had the same abilities.
The employment laws as they stand, discriminate against young women, because the ramifications of employing them, should they become pregnant, is a financial liability for the company.
Sad, but its a business fact of life.
October 29, 2011
The alternative being no protection for pregnant woman leading to more of them being employed? Maybe they could agree to some sort of timescale enforceable by law?
October 29, 2011
You just keep coming out with ‘absurd employment laws’, but when challenged as to how, why and which ones are absurd and the reality of no employment laws seem to lack any substance. Maybe you could correct this?
October 23, 2011
The government should be in the business of paying down debt. It should be slashing the deficit not just slowing the increase. It just shows how much public finances have been debased by politicians that loading all our costs on the credit card for our children to pay back is acceptable.
October 23, 2011
I wonder how much the deficit will increase after Osborne and Cameron give away more cash this weekend and the next few weeks to help save the Euro.
October 23, 2011
I think ‘try to help save the Euro’ would be a better choice of words, only politicians now think it can be saved, reality dictates otherwise. The only question remaining is how much more good money we will throw after the bad we’ve already wasted.
October 23, 2011
Thanks for this clear information John.
I would have expected September to be the first month when the public sector cuts would begin to clearly show. Behind this government’s headlines much coherent work has been going on to cut costs but it obviously does have a run in. In education in particular you can cut costs for the following September which it is unrealistic to cut mid-year. Further cuts will have an effect soon. We’ll be losing my child benefit in January – which is hard as my husband has to live away to earn his salary so our living costs are very high. The lead-in time we’ve had to this cut has been essential to our being able to cope with it.
For the squeezed middle planning time for change is critical for our being able to manage it. So the costs associated with the delays may seem high but they lead to real economic benefits as if you have 6-12 months notice of change you have time to plan ways forward other than dropping into the benefits system.
October 23, 2011
So we are borrowing money to pay interest, and then borrowing more money to pay the interest on the money we borrowed to pay the interest?
Surely there must be some low hanging fruit still to be picked?
– Bonfire night is coming, why not start the promised bonfire of the quangos?
– Pull out of the EU and save £45m per day.
– Ignore the “guidance” of the ECHR, deport illegal immigrants,
and let them exercise their right to family life with their cats elsewhere.
– No inflationary increases in benefits payments,
we’re all in this together and all that.
– Embargo further appointments of consultants for public sector projects, if the public servants can’t handle the job, then replace them with someone who can.
October 23, 2011
– Can you name any quangos that are unnecessary?
– How much will we lose in lost trade?
– You really should research these cases better.
– Only if you can stop the prices rising on rent, food, and clothing.
– So you’d rather hire a full time employee even if there’s no work for them, than just pay an expert to do the work as and if it arises.
October 23, 2011
unamime5, It seems to me that you consistantly miss the point in all your posts which is, we are even now, after “savage cuts”, spending £122 billion more than we earn this year and until we get back to a point where we reduce that figure to zero we cannot afford to spend money on all the projects you would like us to spend money on.
We simply cannot keep spending and borrowing at this level.
Socialism is great, until you run out of other peoples money to spend, and that point is being reached.
October 23, 2011
Can you name any quangos that are necessary? The term wasn’t even invented until 1967, so I think we can say that we probably got along without any quangos at all within living memory.
October 23, 2011
I agree fully employees are not getting increases why should those they are carrying
October 23, 2011
The key figure for me is the addition to the national debt in September was “only” £14.1B or about half the Defence budget I believe.
October 23, 2011
If these were a Company’s interim figures there would be some new faces in the boardroom very soon and some very unimpressed lenders who would demand to know what the new plan was to stop the losses and get the figures into balance.
You cannot claim success in turning round a loss making business if all you do is to slightly reduce the level of borrowing from very high to high.
We all have our particular favourite area where we feel spending should be held level or even allowed to rise but at a time when we are still borrowing £122 billion this financial year further reductions are needed.
These savings needs to come from inside Government because tax levels are at the top of the curve where further rises placed on the public and commerce will only succeed in producing less revenue.
The only encouraging fact is the job transfer from public to private sectors which many economic experts said would never happen due to the “savage cuts”
October 23, 2011
This is cheering news – I actually heard these statistics on the doomster BBC, though I expect they were really telling us that the goodnews meant we could have been borrowing more. Unfortunately I also read the below report by Tim Morgan of Tullett Prebon (ex-Goldman Sachs) which shows just how bad our public finances are…and how we got here.
I was disappointed to hear the bankers alone blamed for our current situation on Any Questions this week…the triumphant Emily Thornberry (Lab) then drew huge cheers for complaining that the coalition had unsuccessfully tried to blame Gordon Brown. It would be really helpful if there was a consistent narrative about why we are in this predicament if Ed Balls is not to be the next Chancellor. I note Mark Field has spotted the problem. Unfortunately the Coalition’s communication is muddled and no match for the consitency of the Labour – “we were fine and the bankers ruined it…”
http://www.telegraph.co.uk/news/politics/8799445/New-Labour-isnt-dead-yet.html
http://www.tullettprebon.com/Documents/…/Tim_Morgan_Report_007.pdf
File Format: PDF/Adobe Acrobat – Quick View
October 23, 2011
The number of public sector jobs fell, is that net of new posts created?
Each quango seems to be a tax spending machine, how many remain and how much are they costing us?
Over a year ago Osborne announced the plan to dispose of public assets. Is there a published detailed plan and timetable for these disposals? Where is the plan? Who is responsible for publishing the results of the chancellor’s success in this?
The government has influence over the bailed out banks yet there seems to be no plan for the disposals articulated. Nor has the government been able to show much progress in reducing the size of its property holdings. They should be disposing not hoarding and speculating in property. The tourist industry cannot find space for hotels in central London yet I pass swaths of government property in use for only eight hours daily. Hotels and restaurants generate valuable income. What is Vince Cable doing about this?
October 23, 2011
It’s good news. If you can get net borrowing down far enough, then inflation will eat away at the debt to GDP percentage, which is probably the most important figure.
But I am starting to worry about what the cost of the new round of bank recapitalization will be… could easily blow these figures out of the water.
October 23, 2011
Interesting numbers, John, thank you for putting them together. So between April and September this year they cut the deficit by around 6%? That sounds reasonably impressive, but I still feel that an actual reduction of just £3.4 billion sounds more like a rounding error in the grand scheme than something you can grab hold of and rely on.
The fact that private sector employment went up by more than public sector employment was reduced should be a cause for celebration. If only we didn’t have all that red tape strangling business, and the banks garotting them at the same time, things might be starting to move along nicely. The possibility of double-dip may make things look different in 6 months time, though. And although is may be a miscegenation, nonetheless a collapse of the Euro may prove to be the most costly disaster ever to hit the planet, as domino after domino falls. We ain’t out of the woods yet, bubba!
October 23, 2011
There you go. Cat out of the bag statement.
Tax revenues are up.
Missed off, unemployment is up.
So that means the employed are being soaked for more money.
Mean while spending is up in real terms.
So much for cuts.
So much for dealing with the deficit.
Then we have civil servants visiting gay night clubs and using their procurement cards to do so. No hint of a prosecution in this case.
Not surprising when you have Gus O’Donnell fighting tooth and nail to have his expenses and spending of your money a state secret.
October 23, 2011
Indeed – I see also we all have to pay for the leaving do for 100 + staff at the BBC can the other over paid, over pensioned, pro EU, pro green religion, big government, anti science lefties not just club together with their own money.
October 24, 2011
Lifelogic , is there a big leaving do ?
They haven’t gone and booked Shirley Bassey or anything like that have they ?
Will it be televised like all the other luvvie lifestyle events ?
October 23, 2011
It would be really helpful if there was a consistent narrative about why we are in this predicament if Ed Balls is not to be the next Chancellor. I note Mark Field has spotted the problem.
Publish the debts, all of them. John Redwood promised this prior to the election, and now elected not a peep. Just like promises of referenda. One story to get elected and then flick the electorate the V when in power.
Once the debts are published, send everyone a statement with their share and what they have to pay.
That solves it.
Reply : the debts have been published.I a have also often reported on them here.
October 23, 2011
This was last published on 28 June:
http://www.ons.gov.uk/ons/rel/naa1-rd/united-kingdom-economic-accounts/q1-2011/united-kingdom-economic-accounts—q1-2011.pdf
There does not appear to have been an update in September, although it had been issued quarterly previously, and the ONS doesn’t indicate if anything else has replaced it.
HMRC is now issuing a prompt and useful breakdown of tax receipts here:
http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.xls
Incidentally, I note that the figure for child benefit net payment for September (order of magnitude £1bn – see rightmost column of spreadsheet) was “not available” and thus may be missing from the overall deficit calculation. Income tax receipts continue to disappoint: I note the OBR (see below for where) commented
In the March EFO, we expected stronger revenue growth in the second half of 2011-12, because of the higher rate of supplementary charge on oil and gas firms announced in the Budget affecting the public finances from October and the delayed impact on self assessment receipts from the introduction of the additional 50p income tax rate on incomes above £150,000. However, the outlook for receipts over the rest of the year is very dependent on developments in the wider economy. Our forecast of this will be updated in our upcoming Economic and fiscal outlook on November 29.
The fact is that self assessment receipts come mostly in January and July: April-September receipts are down 5.8% on 2010 and PAYE down 0.2% although NICs are up 6.6%: the budget forecast was for 3.6% more income tax and 3.2% more NICs. The evidence that the income tax regime is costing revenue from high income taxpayers moving activities offshore (e.g. by going so far as to emigrate) continues to mount. Fuel duty and stamp duty are raising less than in 2010 despite higher rates.
It’s possible to get at the cash interest payments via the DMO site by doing an “advanced” analysis of gilts in issue so they can be sorted by coupon date. Coupons due in October will be minimal – a rough calculation suggests about £1.2bn, compared with close to £9bn in September (many gilts pay out on 7 March and 7 September so there will be another big bill in six months time).
http://dmo.gov.uk/chooseType.aspx?rptCode=D1A&page=D1A
The OBR provide a broad brush analysis here:
http://budgetresponsibility.independent.gov.uk/category/topics/monthly-public-finance-data/
I note that crucial for October will be corporation tax receipts including from North Sea production (which may disappoint because DECC data production volumes appear to have been hit by the new tax rate/regime). The OBR analysis does at least allow a direct comparison to the budget plan. Any business I’ve been in would require a more detailed breakdown and a better assessment of the seasonal breakdown of planned spending and income.
I have yet to find a source that pulls together spending totals by department/area of spending so that we could easily monitor monthly the spending on education, health, defence, etc. Something for the OBR to think about perhaps?
Reply: Good anyalysis – many thanks. It confirms the worries that higher rates on tax often have an impact on behaviour, reducing government receipts.
October 23, 2011
I have no ‘share’ of this debt. It was not raised in my name and I accept no liability. I will be doing my best not to actively pay it either.
zorro
October 23, 2011
It seems to be forgotten by Government and elsewhere that it is their job to reduce the burden on the tax payer – not consitently increase it!
As has been stated before in your column, that tax burden is at its highest. Even Diageo is considering exiling itself from the UK. Cameron has no experience of ordinary life or of that of the hard working people who have to earn a living either as business people or those who have to work for others.
It is time that he was removed. He cannot be trusted and is bringing the party into disrepute. He makes Labour look good!
October 23, 2011
John if the number of public sector employees fell by 240,000 and the number of private sector employees rose by 264,000 then why is unemployment increasing, rather than decreasing? Did more than 24,000 private sector employees lose their jobs?
Reply: because the workforce is increasing
October 23, 2011
unanime5
Perhaps immigration.
Perhaps another year of people leaving school.
Perhaps those that should retire, cannot afford to do so.
October 23, 2011
‘ The more worrying figure was the Public Sector Net cash Requirement, which came in at £19.9 billion. The Treasury says not to worry. This was inflated apparently by interest payments on the debt. It is still cash outflow, and those interest payments are going to continue to rise, as the government continues to borrow more.’…..
This is what will kill the Coalition. They have no hope of achieving any growth over the next years so they will be forced to borrow more. They are not capable of effectively cutting expenditure. More and more money will bleed into interest payments.
Whilst Cameron merrily bails out the Euro covertly, they will probably manage to stabilise the Euro area. If the Eurocrats can get the markets to think that they are serious about using the 2-3 trillion to support the Eurozone, they will get some rest-bite and then the markets will look for their next easy picking…..oh dear
zorro
October 23, 2011
OK so the figures are curate’s eggy. The excellent news is the fall in the number of public sector employees. Excellent news!Keep up the good work. And more than that are now being transferred to the private sector.
But all I want to say is this: good luck for tomorrow. You are right. Keep at it!
October 23, 2011
The BBC reports on David Cameron having “”secured a commitment that would protect the interests of the UK”, adding that after European leaders had held emergency talks, Mr Cameron had said that any change would not be against UK interests.
I wonder what DC had to offer in return to secure this commtment?
And now DC tells us that any change would not be against UK interests.
So bang goes any opportunity to negotiate anything in return. Instead, we are led to believe that he has just about managed to secure the status quo. Or am I reading this incorrectly?
The trouble is, we have been told so often that this or that treaty or other is either inconsequential (i.e. merely a tidying up exercise) or in our interest. And look where belief in that has led us.
October 24, 2011
“I wonder what DC had to offer in return to secure this commtment?”
Sarkozy and Merkel have made Cameron their bitch and he is evidently really proud about it .
October 24, 2011
There is a lovely contradiction in terms at the heart of the debt/deficit debate, which is thus. The structural deficit (that’s the bulk of the deficit) is by definition that part of the deficit which is not designed to, and does not have any effect on stimulus. Yet 90% of economic commentators have a habit of making claims to the effect that “we must cut the deficit, but not too quickly, else that would hinder the recovery”.
Well reducing the structural deficit and debt, or even abolishing them altogether, cannot by definition have an “anti-stimulatory” or “recovery hindering” effect. More details here:
http://ralphanomics.blogspot.com/2011/10/paying-off-debt-would-not-hinder.html
October 24, 2011
Out with friends over the weekend, (yes I do have some)
One retired lady had just recieved a letter from the Inland Revenue.
They have calculated that she underpaid her tax last year by £0.40 pence, so would she please forward that amount without delay.
I jokingly said she should ask for time to pay.
But seriously John, is this even a sensible request, given that the stamp for the letter cost over 40 pence, is this why we have got into so much trouble.
A complete lack of commonsense, a slavish following of box ticking, and the following of rules to the extreme.
Have we recently really employed more tax collectors to come up with this sort of request, or does it mean that they can now add the success of catching yet another so called tax dodger on their score sheet, to prove what a successful department they are, in order to get a bonus.
You couldn’t make it up, only in the UK, or perhaps on second thoughts in the EU.