The July figures show government current spending up by 3.7% and net investment up by 49%. Borrowing, at £500m, compares to a repayment of £800m in July 2012. For the four months April-July total borrowing was £36.8bn compared to £35.2bn the previous year. I do hope people will stop talking about the cuts and austerity, given these figures. The public sector is continuing to expand and to borrow substantially to boost demand.
The Treasury has recently released updated figures for past years. These confirm the analysis and forecasts of this site. Between 2009-10 (last Labour year) and 2012-13 total current public spending rose from £604bn to £657.5bn. In real terms it also rose, by £14bn. Large increases were seen in social security, up by almost £20bn, tax credits, up by £2.4bn, public sector pensions, up by £3.3bn and EU contributions, up by £2.7bn. Capital spending was cut, but this is also now rising again on the latest figures.
August 21, 2013
‘ …The public sector is continuing to expand and to borrow substantially to boost demand.
I’m confused. I have read that the number of public sector jobs is down – by a big number. Many hundreds of thousands.
How can the ‘public sector continue to expand’? Don’t understand.
Reply They are paying more and spending more. Much of the expansion is in transfer payments to others.
August 21, 2013
What are transfer payments John. I know the public sector have their own language but we in the private (productive) sector don’t understand it.
I hope the government is going to seize the assets of the Balcombe protesters to pay for policing.
Reply Benefits, pensions etc
August 21, 2013
There’s two types of public spending – the type that is shooting up is benefits to the elderly (inc state pension), tax credits, public sector pension liabilities, social care, healthcare, and public sector pay (tho not massively).
The other type is investment and infrastructure spending. Despite all the hype of HS2, this sector has been slashed massively. Local authority spending has also been substantially cut due to lack of cuts in the first type.
The cuts are essentially heavily loaded on corners of the state that are polically acceptable to target – which on their own are not enough to control escaluating spending in the years ahead.
August 21, 2013
What is a ‘transfer payment’?
Reply A benefit or pension payment so someone else can spend the money
August 21, 2013
Many of the tasks performed by the public sector are now provided by the private sector. This often results in these tasks costing more money as the private sector, rather than the state, benefits the most from any savings through greater efficiency.
August 21, 2013
Really?
Tell you what show me a comparative example, go on. I think you’ll find when you take total cost into account the public sector is vastly more expensive. Not least of which the staff costs with their gold plated pensions which doesn’t exist in the private sector and added to that all the taxes paid by the private sector that aren’t paid by the public sector.
Some come on show us the evidence uanime5
August 22, 2013
My point can be proved using basic logic.
Let’s say Company A hires Company B to build them some pipes. If Company B finds a way to reduce the cost of making these pipes but doesn’t pass the saving on Company A then Company B will make a larger profit, while Company A gets no benefit from this innovation.
By contrast if Company A makes these pipes in house and find a away to reduce the cost of making these pipes then Company A will benefit from this innovation by having reduced manufacturing costs.
You know libertarian for someone always talking about wonders of the private sector you seem to know very little about it. The pros and cons of in house production vs outsourcing is one of the most basic aspects of business management.
Your post about gold plated pensions shows you know nothing about the levels of pensions people in the state sector get. It also shows that you have failed to realise that if a person doesn’t have a large enough pension to retire on then all they’ll do is claim more welfare. Low private sector pensions are part of the reason why pensions make up such a large proportion of the welfare bill.
You’ve also failed to realise that both the public sector and private sector pay taxes. Before you claim that the public sector is financed with taxes from the private sector you’d do well to remember that private sector companies hired by the state are paid for the same way.
August 23, 2013
Uni
Your simple example assumes the manufacturing companies are able to keep their improved methods secret.
It has been my experience that it soon gets round the trade and these improvements are soon the new norm.
Progress is what we in manufacturing tended to call it, and it was vital for survival.
You also wrongly assumes little or no competition between the companies tendering for these big contracts.
August 22, 2013
Unamine, the public sector employee tends to always be more expensive, because the taxpayer is funding their benefits directly. Also any money reclaimed in tax from is taxpayer money, from a private sector employee this is often not state money as contractors do private sector work as well. Also public sector employees have six times as much time of sick as the private sector, so their productivity is not high. As we know, many of the jobs don’t need to be done anyway!
August 22, 2013
If the state hires a private company to do something that was done by the public sector then any money reclaimed in tax from is taxpayer money. Money from the taxpayer does not magically change into something else simply because it is given to a private company.
Given that more people in the public sector work in hospitals than the private sector it’s no surprise that they have more sick leave. It seems that you’re unable to understand why certain statistics might occur.
August 23, 2013
Uni
You are wrong
Absence and sickness rates in the public sector are higher in percentage terms than the private sector.
August 22, 2013
I have seen instances where work previously carried out by the public sector has been contracted out to a commercial supplier thus taking on the Public Sector staff via TUPE, implementing efficiencies and increasing the effectiveness whilst vastly lowering the cost of the service.
What does the public sector supplier then do? Take on a load more staff to do other things using the money saved…
August 21, 2013
So, come 2015, what lines will be trotted out to justify this state of affairs?
Can either of the parties Libdem, Labour, Tory be trusted to balance the budget?
August 21, 2013
Trust is not the issue since they all do the same – so the good news from those figures is that we know in advance of the reality what a Balls chancellorship would be like. Things can only get better!
August 21, 2013
Tax borrow and piss down the drain in the usual Osborne/Cameron style, rendering the businesses that feed this bloated parasite, unable to compete or expand. It does not sound very “sustainable” to use a Cameron/Libdem word.
August 21, 2013
One assumes Cameron has just given up on the election and decided to bequeath an even bigger mess to Labour in 2015 than the Coalition inherited.
The spending might not be so bad if the government were spending it on something useful that gave some return. Alas payments to the feckless, HS2, quack energy, the EU, pointless wars, overpaid and pensioned paper pushers, a dis-functional NHS, poor schools, BBC propaganda, gender equal insurance, enforced equality of outcome etc. are not really investments, they will not ever give much or any payback.
August 21, 2013
Once again, and as apparently ever, there is that little word “net”. My ignorance, but I struggle conceptually to understand what “net investment” might signify in a Government context. Maybe net of income, I dunno, that’s assuming the Government ever gets anything back. The bank I was taught Credit Analysis by had a policy when ‘spreading’ financials always to show everything gross (or “broad”), which made and makes all the sense in the world to me. Net figures, in particular as with the ghastly “net inward migration” (migration is something that wildebeest do across the Serengeti–I know that much), are the very definition of potentially misleading.
August 21, 2013
Leslie
“net”
Agree with you absolutely, it can cover a multitude of very expensive sins.
August 21, 2013
So, 6 billion extra on public sector pensions and payments to the EU. Never mind, our children can afford to pay it back one day. And pay for their own services and pensions eh?
And 12 billion on foreign aid.
And Social Security payments up despite the rhetoric on ‘welfare’.
Where will this all end?
August 21, 2013
“Between 2009-10 (last Labour year) and 2012-13 total current public spending rose from £604bn to £657.5bn.”
And the total newly created money that the government has indirectly borrowed from the Bank of England has risen from virtually zero to £375 billion.
Which by my rough reckoning means the Bank has financed all of the increases in public spending over the past three years, plus the same again several times over of the previous level of spending.
There is no point insisting that the government should cut its coat according to its cloth when it can always induce the Bank to provide as much cloth as it thinks it needs, and with no questions asked, not even by MPs.
Reply £200bn of money creation happened under Labour
August 21, 2013
And £175 billion under the coalition.
It will be nearly £1900 billion total public spending over the three years, of which about £375 billion has been funded by the Treasury indirectly borrowing newly created money from the Bank.
Without looking up the figures I can’t state an exact number for the net increase in Treasury borrowings from normal gilts investors over that period, but it will be small compared to the £375 billion it has borrowed from the Bank, maybe only £50 billion – perhaps he who posts as Mark will have the number.
So thanks to the Bank buying up surplus gilts from the market the demands placed upon normal investors have been very low, almost as if the government has been running a budget deficit of only a few per cent rather than over twenty per cent, and gilts prices have been kept high and their yields kept low.
August 21, 2013
These figures are simply a disgrace given the financial state we are in.
All promises, no delivery.
Simple as that.
August 21, 2013
Where does all this end, John? 2015, post election? It frightens me to learn that this country is still trying to borrow its way out of recession.
Government figures say there is no recession. Is it any wonder when the Government purchases actually count towards GDP? The figures can easily be manipulated in their favour. Gordon Brown was the Master at it but they also say that inflation is under 3%.
Tell that to the householder, whose utility bills have soared and the weekly costs of their shopping baskets gone up by multiples of the official rate of inflation.
The interest payments on our National debt is nearly £1Billion per week at current bond yield rates, around 2%. What will happen when (not if) the Bond markets take fright and dump Gilts and those yields ride North?
With a total debt pile exceeding all other nations bar a couple and no effort being made to reduce it, I believe it is only a matter of time before the Gilts are liquidated. Short time.
Once that starts, where will the Government turn for money then? The IMF? Yields will soar, borrowing costs will rocket and all because the Government refuses to address the problem head on. Only because they want to win the next election and to do that they need to coerce and bribe the Public Sector Unions to stay on their side. This is no way to run an economy, is it?
August 22, 2013
“Once that starts, where will the Government turn for money then?”
To the Bank of England, of course, which has willingly become the government’s (indirect) lender of last resort; just as Darling did from early 2009 into early 2010, to the tune of nearly £200 billion; just as Osborne had done since, to the tune of another £175 billion; and just as this chap Weale is suggesting might be necessary in the future:
http://www.telegraph.co.uk/finance/economics/10258078/More-QE-could-be-needed-says-MPC-hawk-Martin-Weale.html
But he is maintaining the old line that more QE may be needed to stimulate the economy, when since May 2009 it has been clear that in the UK the primary purpose of QE has always been to make sure that the government doesn’t run out of money to pay all its bills in full and on time.
Over the past three years the Treasury has indirectly borrowed £375 billion from one abnormal gilts investor, the Bank of England, but maybe only a net £50 billion from normal gilts investors; when the Bank is buying up previously issued gilts as fast as the Treasury is issuing new gilts the government has effectively got itself out of the clutches of private bond investors, who are reduced to being little more than intermediaries facilitating the migration of gilts from the Treasury to the Bank and the migration of money in the opposite direction.
August 21, 2013
An increase in overall spending does not preclude a cut in spending. It’s entirely possible for the Government to increase overall spending while at the same time cutting existing budgets, provided that they raise the budgets in other areas by a greater amount than the amount that has been cut. For example if the Government was to cut £1 billion from state school funding and increase the funding for academies by £1.2 billion the just because the overall funding has increased by £0.2 billion doesn’t mean that there haven’t also been cuts.
August 21, 2013
Are you claiming your example is actually happening or is it just a fantasy Uni?
August 22, 2013
Well academies have had their budget increased. Whether this came from cuts elsewhere or more borrowing is irrelevant as my point was to show that you can have cuts and increased spending.
August 22, 2013
Uni
No they haven’t had their budgets increased, you are playing with words.
There are now many more academies than there were years ago and these have to be funded.
So overall funding for the increased numbers of academies has risen.
This isn’t the same as “academies having their budgets increased”
The numbers of state schools may have fallen and so less money will be spent on them.
This is not the same as saying state schools have had their budgets reduced either.
August 21, 2013
Do you write this stuff with a straight face?
August 21, 2013
@uanime5
“…just because the overall funding has increased by £0.2 billion doesn’t mean that there haven’t also been cuts.”
Do you use this kind of logic to run your personal budget?
August 22, 2013
You have to use this logic if you run a personal budget.
Would you care to explain how cutting the state school budget by £1 billion and giving this money to the academy budget is not a cut to the state school budget.
reply If some schools have changed from being “state” schools as you call them to being state “academies” then switching the budget is necessary as there are fewer state schools and more academies (which are also of course state schools)
August 22, 2013
Academies are largely publicly funded too – how are they not state schools? (Just being not NUT approved doesn’t make them private sector, does it?)
August 22, 2013
Unlike state schools they don’t have to follow the national curriculum or have qualified teachers.
August 22, 2013
Uni
Care to explain why they are all oversubscribed?
August 21, 2013
LOL, Like there’s a chance we will ever be able to pay it off. GBP will collapse same as ALL the 3600 fiat currencies before it. Thats because we have (bad people ed) in government and (ill advised people ed) that keep voting them in. The informed and educated are kept slaves by the masses of zombie addicted to x factor and other mind mushing tv. Prepare for the REAL recession just around the corner. The economic ‘dip’ so far has been a cake walk by comparison. Enjoy!
August 21, 2013
investment in what has risen?
August 21, 2013
Off Topic I know but this is important !
Der Spiegel today is reporting that Brussels is planning on paying for the inevitable third Greek bailout package out of the EU budget because of the impossibility of getting the measure through the German Bundestag. The plan appears to be to take the money through structural funds.
If this rumour it true, it means that Britain will be contributing towards the bailout of a Eurozone country, something we were assured would not happen ( other than through our share of the bailout money paid by the IMF ).
This needs to be nailed on the head straight away : do we have a veto on this ? I don’t know. Either way, the possibility needs to be brought to the attention of David Cameron immediately.
Over to you Mr Redwood………………
Reply NO we do not have a veto on any individual budget year spending. That would be bad news indeed.
August 22, 2013
Hum, Cameron said that he’d got an undertaking that we would NOT be expected to contribute to any future eurozone bailouts. It’s what the government describes as “repatriating the bailout power”, even though the treaties provided no “bailout power” which could be repatriated, and claimed to be the highly satisfactory quid pro quo that Cameron obtained in exchange for his assent to the EU treaty change to make sure that the eurozone states had the legal right to set up the ESM, agreed through European Council Decision 2011/199/EU of March 25th 2011.
As he said on October 24th 2011 in reply to a question from the Tory MP Mark Reckless, at Column 36 here:
http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm111024/debtext/111024-0001.htm
“Mark Reckless (Rochester and Strood) (Con): The Prime Minister tells The Daily Telegraph today that we should use any treaty change to shore up the euro to get powers over employment and social policy back, yet on 25 March, he agreed to precisely such a treaty change, but did not ask for anything in return.
The Prime Minister: I have to take issue with my hon. Friend. The very limited treaty change that is about to be debated in, and hopefully passed by, the House of Commons, gets us out of the bail-out mechanism that the previous Government got us into. I thought, and I still think as Prime Minister, that that was the single most important price that we could exact for that treaty change – that was the biggest concern of the British public. The point I made yesterday and that I will make again today is that I believe that huge changes will take place in the EU and the eurozone. That will give us opportunities to maximise the national interest, which is what we should be talking about and debating in the Conservative party, the coalition and the House of Commons as a whole. We will not further that by having a referendum that includes an in/out option. As I have said, that would be like walking away from a burning house. We should deal with that first, then talk about the future.”
August 21, 2013
The high speed rail project will be a bonanza for the private sector with billions being spent, so how private sector will these companies be especially if they are foreign owned state run private sector ones? This whole project will be a goldmine for many private companies here though, but only a few companies will benefit and most will be paying minimum wage, but not to their executives, their families and chums. Building council houses is a better use of £22billion presently subsidising greedy private landlords, so lets spend at least that on putting the chains of private landlords who are renting back at higher rates a third of the council houses sold out of business. Our kids and the homeless deserve what we have. A house.
August 21, 2013
The political class seems utterly incapable of controlling government spending, and hell bent on self indulgent schemes such as HS2, foreign aid, and Climate Change Act mandated subsidies for non-performing assets. Disaster looms. The only unknown is the timing.
August 21, 2013
JR: “The public sector is continuing to expand and to borrow substantially to boost demand.”
The government led by your party is responsible. Now I have confirmation of what I suspected was the reason that politicians no longer talk about the deficit and the national debt, it is because far from reducing it is increasing. Who in parliament cares? Your party lied to the country about how they would manage the economy. They are no better than the useless Brown. We have a virtual one party state in parliament none of whom is fit to run a whelk stall.
August 21, 2013
So public expenditure has been growing at 0.8% per annum in real terms. That is too much. We need to keep the big picture simple. We should pick up on Liam Fox’s suggestion that public expenditure growth should be zero until the economy comes right. That would help to reduce the interest rate that the government pays to borrow; it would a much more effective tool than Mr Carney’s forward guidance.
August 21, 2013
Looking ahead, the number of over 65s will have risen by a third by 2030, and no political party has addressed the issue of the cost of their health care and social care. The government and the medical profession are actually BOASTING that they have extended the life of MEN who have reached 75 by 4 years on average. Can you imagine more stupid behaviour? If it has involved the administration of new powerful drugs and extra drugs to suppress their side effects, then it is doubly mad.
Get real; most men are clapped out at 70 and should just be allowed to enjoy their bridge and golf and wear out quietly. I’m not sure what the policy should be with elderly women; they lead more flexible lives than men and are perhaps useful for longer.
The key thing is that we must stop investing in yesterday.
Reply Most of us want to live in a society where people are given help to lead longer and more fulfilling lives. You cannot and should not write off all men at 70!
August 22, 2013
I heard on the BBC some days ago that a survey had been done and the results were that 65s and over were dying more quickly than the rest of the population AND that over 85s were dying even more quickly. !!
I had a huge giggle – the BBC should be abolished. Old people have more of a tendency to die than the younger rest of the population. Who the hell organised this idiotic survey ?
August 22, 2013
Reply to reply: Then you will have to accept a rise in the standard rate of income tax to pay for the increasing cost of the health care and social support that you wish to see provided. A projected increase of one third in the number of over 65s cannot be ignored. We are, after all, running an annual public sector deficit of £120 billion at the moment, about 7.5% of GDP.
In fact, I defy you to produce a budget with no increase in the standard rate of income tax, a deficit reduced to £40 billion a year and increasing expenditure on the retired elderly.
August 21, 2013
In all seriousness, Mr. Redwood, where do you see this ending?
August 22, 2013
This is a case of look beyond the headlines.
The increase in public spending has come tbrough increased public sector pay per head which can only mean tbat management has continued to feather its particularly comfortable nest. Is it not time for a cap? And on top level pensions too I am sure the increase in public sector pensions has not been driven by the £4, 000 per year paid to retired administrative staff.
Transfer payments have increased. What effect has net inward migration had on this? More people equals greater housing costs to be borne by the taxpayer; both the level of rent and the number of payments. Migrants drive down wages leading to increased in-work benefit payments subsidising business.
Our youth who lack grit would not be allowed to lack grit if unskiled positions were going unfilled, if we couldn’t get a sandwich from pret or Tesco’s shelves were uempty the public outcry would soon ensure there were not one million neets (even if these people were truely feckless which most of them aren’t).
The cap on housing benefit may reduce the rate of increase somewhat but the numbers claiming will continue to rise. Universal credit will offer no savings as the claimant able to claim at the £25K cap will still get the same amount of benefit while keeping all of any minimum wage earnings they get paid less a paultry amount of tax. Mean wages earners will still need to compete for housing and food costs with these claimants who are now taking home £36K. I wonder how many Eastern European and Mediterranean families will benefit from this new arrangement?
August 22, 2013
“Migrants drive down wages leading to increased in-work benefit payments subsidising business” – Tony Blair still thinks mass migration was good for the UK economy – really?
August 22, 2013
@Narrow shoulders
“if these people were truely feckless”
The cure for fecklessness is to stop subsidising it.
August 22, 2013
They tried that in the USA and the feckless turned to crime to survive because there weren’t enough legal jobs available.
August 22, 2013
@uanime5
“the feckless turned to crime to survive “
Why didn’t they buy a bucket and a sponge and clean cars?
They could learn much from some of our recent immigrants who come here with ambition but without a sense of entitlement.
It’s the sense of entitlement that stops people from becoming useful members of the community, “give me your money or I’ll steal it from you”.
Where do they get the sense of entitlement?
Why from the UK welfare system of course.
Power to Iain Duncan Smith’s elbow!
August 22, 2013
Strange then Uni, that in the USA huge numbers of people who were long term unemployed have found work.
Would you say this was good or bad?
August 22, 2013
I haven’t looked at the figures. What I would like to know is how much of this extra spending is for increased debt interest? And I take it the increased EU contributions are something agreed by that Genius Mr Blair or Mr Cameron has quietly lost his battle with the EU in respect of the budget increase.
August 22, 2013
I wonder how the next Lib/Lab coalition will do things.