Steady as she grows – the Budget today


We know most of the main numbers of the Budget. These days they are given to us in the late Autumn (December) Statement, with full forecasts from the OBR. The revisions to these this March are not likely to be large.

The Chancellor may be able to anticipate a bit faster growth, and therefore more growth in tax receipts than planned at the end of last year. He will doubtless wish to increase the tax threshold as much as he dare. He might even allow some of the benefit of this  to accrue to 40% taxpayers as well as to 20% taxpayers.

Growth will come from most parts of the economy. Current public spending contributed with a real increase of 1.7% in 2012, and  a further real increase of 0.7%  in 2013, according to the OBR. They anticipate another 0.4% increase in real current public spending in 2014, with a good pick up in government investment as well that year after  cuts in previous years.  Public borrowing was forecast at £111bn in 2013-14, and at £96bn next year. There may be some improvement in those numbers thanks to faster growth.

There will be various schemes to promote extra growth. We have already been told of the planned new town at Ebbsfleet. This was the subject of my publication “Thames Reach a new city” which made proposals for the brownfields near Ebbsfleet. We are told that Help to Buy money for newly built homes will continue until 2020 if there is a Conservative government elected in 2015. I would expect more tax relief and assistance for companies taking on extra labour, especially of younger people.

The Office of Budget Responsibility may well have to revise its forecasts again to catch up with the reality of faster growth now coming through very visibly. There may also be rises in real wages before the end of the year, after the slump  in people’s spending power in 2008-10 and the continuing stresses on real incomes since.



Total Managed expenditure

2012-13       £701.9bn

2013-14      £717.8bn

2014-15       £730.5bn

2015-16       £744bn     (OBR figures Autumn 2013)


  1. arschloch
    March 19, 2014

    Or in other words those in the middle who go to work, pay their taxes and obey the law get screwed as usual, so the parasites at each end of the social spectrum can continue to maintain the lifestyles they are accustomed too.

    1. Tad Davison
      March 19, 2014

      Amen, but I’m worried that genuinely disabled people are being lumped together with little miss yo-yo knickers or the type of people we regularly see on the Jeremy Kyle show. For me, the DWP could hit the latter as hard as they like, because the ‘parasites’ get the rest a bad name – but Osborne doesn’t help. He blurs the distinction between the two so that even genuine people are pilloried.


      1. Hope
        March 19, 2014

        And another £106 billion will be added to the debt. About £14 billion on overseas aid, increasing as the economy grows, a sixth of which is spent by the EU. £55 million each day wasted on EU give away scheme with another £100 billion or so lost in tax because of the Maastricht Treaty. £53 billion on interest payments from the debt. It does not appear to me he has done anything to balance the structural deficit as he promised or appears to be “steady as she goes” budget claimed by JR. Tax and waste continues. When will the half- wit learn he needs to stop spending to balance the budget! Is he really that slow to grasp what needs to be done?

    2. Narrow shoulders
      March 19, 2014

      ‘Twas ever thus and it will be until the client patron link to political parties can be broken.

    3. uanime5
      March 20, 2014

      Well as long as companies pay their employees as little as possible these employees are going to need to claim benefits.

  2. margaret brandreth-j
    March 19, 2014

    I wonder what the OBR would forecast if labour got into power.Would it still be similar?

  3. Lifelogic
    March 19, 2014

    Doubtless it will be lots of jam tomorrow, after the Tories have left office. This and some absurd, childish, gimmicks such as no IHT on some state sector workers who die in the line of duty. Did many ever pay any were they not married or in partnerships? What about his £1M IHT threshold promise he made, will he ever de-rat on this will he even mention it? How can one trust anything he says?

    I heard Norman Lamont on the daily politics (who often talks sense now), say that having worked with Cameron he knows he was a Eurosceptic. He is clearly still rather easily taken in. No Greater Switzerland, heart and soul Cameron’s every action and appointment shows exactly the reverse.

    He was taken in by getting involved in the absurd ERM and his foolish failure not to resign after its collapse. Destroying £billions, jobs, homes, and countless businesses in the process.

    1. Mark B
      March 19, 2014

      All the while he was singing in the bath – allegedly ?

      It came as no surprise Labour trounced them in 1997. But what they lost that day was more than an election and power. They lost the trust I had in them that they could manage an economy. And some thirteen years and four elections later, it looks like we still do not trust them, and never, ever will.

    2. Hope
      March 19, 2014

      Lament, like Cameron is everything EU and tries to pretend otherwise to fool his party. Look what Lamont cost us. Another one who should have his pension and title taken away.

  4. petermartin2001
    March 19, 2014

    Thought for budget day?

    Taxation is simply the process of governments collecting back some of their own IOUs , what we call money. They have earlier created and spent it into the economy. If they hadn’t done that no-one would have ever been able to pay any taxes, at least using government IOUs, for the simple reason that there would never have been any to pay taxes with.

    So why do governments tax? After all it would be much easier to just write out new IOUs as needed. They generally just tear up their old IOUs when they receive them back, just like you or I would.

    Two reasons:

    1) Taxation creates a demand for government IOUs. That gives them a value. It makes the $ and the £ worth something.

    2) Taxation reduces our spending power. This is unfortunately necessary to prevent inflation.

    Taxation is nothing to do with raising funds for government spending in a country which issues its own currency. If governments tell you they need to have a high level of taxation, when there is no inflationary problem, they aren’t being truthful.

    1. Mark W
      March 19, 2014

      I’m utterly fascintated by this notion. Can JR explain this please?

      1. petermartin2001
        March 20, 2014

        It would be good if every politician were able to explain the workings of the economy. Most UK citizens are reasonably well informed on most things, by international standards. At least in my opinion. You just need to go to a pub quiz to see that for yourself.

        The big exception is economics. People really do think that governments are like households. They think the government have bank accounts in the same way as everyone else where they carefully store all their tax revenues. If they are overdrawn they have to go off to negotiate a loan from the Chinese or the Swiss or whoever.

        They think that when they put their money into the bank that it then lends that same money out to someone else. When the bank don’t have any left then they can’t lend out any more. And therefore the laws of supply and demand will push up interest rates. They think that the ££ they see in their bank accounts are the same ££ as the banknotes in their wallets. It’s just not true.

        Many people have very strong opinions based on totally erroneous beliefs on how the economy actually functions. It’s just not a healthy situation for an active democracy.

    2. waramess
      March 19, 2014

      Your’s must be the most absurd posting ever. Money is not government IOU’s as you suggest it is a medium through which goods are exchanged. Money exists not because governements print it but because there needs to be a mechanism between production and consumption.

      If there were no production there would not be a need for the medium of exchange and government produces nothing.

      Taxation s the method by which the government sequests a portion of the rewards of production for its own consumption

      1. Mark B
        March 19, 2014

        Money is nothing more than a ‘promissory note’ to pay the holder the full sum stated on it. If you care to look at one, you will see; “I promise to pay the barer upon demand the sum of . . ”

        The real question for me when it comes to money, is its value. Wilson’s famous pound speech after deflation was a consummate example of how politicians lie. Of course a pound is still a pound. Like the Sun is still the Sun. But the Sun loses billions and billions of tons of fuel everyday. Its still bright, its still hot and its still the Sun but, it weighs less.

        The spending power of Sterling on the international currency markets is what is important, at least to me.

        1. waramess
          March 20, 2014

          You are wrong. Money is a medium of exchange and can manifest itself as many things. At the moment the UK government issues bits of coloured paper that are used as money. They are not IOU’s nor are they promises to pay for, as you say they promise to pay with yet another coloured bit of paper.

          As any forger knows the bits of paper are virtually worthless intrinsically and those who are able to copy them can become rich.

          The reason why these bits of paper have a perceived value is because the government implicitly undertakes to protect their value and give them much the same attributes as commodity money.

          That is; the government of the day ensures there is only one entity that can print them legally and the government ensures they will represent sound money (in short).

          As a result these bits of paper are now used as the medium of exchange, for the time being, although their role as a store of wealth has been fast disappearing. Most people are now aware that if you leave these bits of paper in the bank for any period of time they become worthless which explains the low level of savings in the UK.

          Governments like most politicians cannot be trusted however and no sooner than you place trust their way they abuse it.

          Now governments have started to flood the market with ever increasing bits of coloured paper it becomes progressively less valuable and people become less confident in it retaining value.

          So, the bits of coloured paper only have a value as a medium of exchange under certain circumstances and many people are now waking up to the idea that sooner or later it will no longer be accepted as such. Hence the rise in the price of gold and silver which in the past have always ended up the favoured medium of exchange.

      2. petermartin2001
        March 20, 2014


        There are plenty of people who would agree with you. People do tend to think that there must be something more substantial to the £ than just an IOU . Coming to terms with the idea the entire financial system is based on nothing more than IOUs and debt can be a difficult process for some.

        But, if you don’t believe me, you might want to take a look at this article in the Guardian.

        I wouldn’t expect you to take too much notice of what the Guardian themselves might say but there’s a link in the article to a BoE paper by Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. This makes for interesting reading. I don’t quite agree with them on QE but the rest is pretty good.

  5. Gary
    March 19, 2014

    Smoke and mirrors. Govt spending increases GDP. Govt can literally grow GDP unfettered by having the central bank purchase unlimited gilts, by printing unlimited money to be spent by govt on HTB and other handouts.

    Alice would have been pleased.Where does this end? The govt becomes the entire economy. We all work for the govt. We become the Union of Soviet Socialist Kingdom.

    1. ian wragg
      March 19, 2014

      That will be the EUssr then. When they’ve de-industrialised all but Germany and we are all living in tents, they can issue us with vouchers for spending money. Huxley’s Brave New World is a good read. I did it for A levels in the 60’s and it is fast coming to pass.

    2. Lifelogic
      March 19, 2014

      “The govt becomes the entire economy”.

      Well almost, even when they do not own it they control how is it run, the employments laws, environmental laws, energy laws, the gender insurance laws, the planning laws, the devaluing currency – they might as well own it – they take 40% when you die anyway. In total they can take perhaps 90% of your capital off you over a lifetime with all their tax, NI, VAT, IHT, CT, IT, duties, rates, SDLT ……

      Eventually only the black economy is left and corruption/bribes to get anything from the state sector becomes the only way to survive, as in so much of the EU.

    3. petermartin2001
      March 19, 2014


      ” Govt spending increases GDP”

      Yes. Good to see someone coming around to my POV! 🙂

      ” printing unlimited money ” ??

      That’s a little bit old fashioned. Money can be created much more efficiently by keystroke in a government computer these days.

      “Where does this end?”

      When the Government decides to repay its debts, maybe ? It won’t ever have anything other than its own IOUs to do this with, so maybe it will never end?

    4. Mockbeggar
      March 19, 2014

      Actually I’ve just read somewhere else that govt. spending has reduced from around 48% of GDP to around 42% since Labour lost office. Not enough, but better than nothing.

    5. APL
      March 19, 2014

      Gary: “Govt can literally grow GDP unfettered by having the central bank purchase unlimited gilts,”

      Which goes to show how useless a measure GDP is.

  6. alan jutson
    March 19, 2014

    I await with interest but little expectation, for some good news and common sense measures in the Budget today.

    Will it be more of the same with yet more taxation and public spending, or will the Chancellor at last come up with the original idea that people spend their own money, rather better than the State does for them.

  7. Andyvan
    March 19, 2014

    The Budget. A bi annual massaging of statistics to justify more theft from the productive via taxation.
    I think we can guess what will be in it. Token gestures to fool the gullible into believing they are better off. Back door tax increases. Public spending increases possibly with headline grabbing and ultimately disastrous policies. Several hours of waffle. All with the end result that nothing actually improves and politicians squabble a bit and then congratulate themselves as being essential to the country.

    1. Mockbeggar
      March 19, 2014

      What part of govt. spending would you reduce and do you think you could manage the moans and rage of those who would believe themselves to be affected?

  8. Narrow shoulders
    March 19, 2014

    I refer the honorable gentleman and his Chancellor to the stated aim of reducing the deficit by 80% cuts and 20% tax increases.

    The tax increases in greater levels than trailed have delivered a significant but insufficient dent in the deficit and these have been targetted disprortionately at PAYE slaves in the higher rate threshold (a marginal rate of more than 100% for some on £60K).

    When can we expect the upper levels of the civil service and the fortunate private sector executives sucking on the states teat ( through outsourcing and consultancy) to experience the pain that we are all in together

    1. Lifelogic
      March 19, 2014

      “80% cuts and 20% tax increases”

      Cuts what cuts? Tax waste & piss down the drain all over the place is the Osborne way. Ensuring a huge misallocation of capital with HS2 and the greencrap subsidies.

      The deficit is just deferred taxation anyway. It is the spending that is totally out of control.

  9. Lifelogic
    March 19, 2014

    They may well increase the tax threshold to £10,000 but I assume the 12% (plus employers) National Insurance Tax will still start at under £8000. So the taking out of tax claim is still a lie.

    What they do to tax rates is largely irrelevant anyway, if they continue spending & wasting on the huge scale as currently. The deficit is just deferred taxation anyway.

    Get rid and the green crap subsidies, the payments to augment the feckless and HS2 as a good start then fire half the state sector that do little of any use.

    1. Mark W
      March 19, 2014

      I know you bang on about HS2 but what really annoys me is the notion that it will be quick. No it won’t!!

      The train may be fast but as it will no doubt be seen as a terrorist target and then check in and metal dectector arches and other security nonsense will no doubt mean that one could turn up and board Thomas the Tank Engine with minimal wait, travel at slow speed and arrive quicker than with the airport style security check in and faster running speed.

    2. behindthefrogs
      March 19, 2014

      Any budget changes should concentrate on NICs both employee and employer rather than income tax and corporation tax.

      Reducing employee NICs concentrates the changes on the the lower paid workers.

      Reducing employers’ NICs ticks so many boxes.
      1) Encouraging employment.
      2) Encouraging import replacement by making manufacturing more competitive.
      3) Encouraging exports by similarly making them more competitive.
      4) If retained for profit a lot of it will be recovered by corporation and other taxes.

  10. Roy Grainger
    March 19, 2014

    “The Office of Budget Responsibility may well have to revise its forecasts again”

    Not much good at forecasting are they ?

    1. Kenneth R Moore
      March 19, 2014

      Indeed. Not much good at being ‘independent’ either.

  11. acorn
    March 19, 2014

    TME (total managed expenditure) can’t be forecast to zero point one of a billion, and when did the OBR ever get a forecast correct. TME is split into two parts DEL (department expenditure limit) and AME (annually managed expenditure) which in reality is unmanaged. Social security benefits and tax credits make up £2 in every £3 of the AME; £1 in every £3 of TME.

    Osborne wants an AME “cap” that allows the automatic stabilising welfare benefits to operate during recessions to compensate for a falling economy. He can cap the level of individual benefit levels; but, he can’t control the number who turn up to collect it. Working age benefits have increased AME the most, (with state pensioners and debt interest close behind); a direct result of two years of recession and three years of subsequent “austerity” driven economic stagnation.

    The rise in TME is due to a stagnant economy, not Osbornes largess. He is way behind (thankfully) on his deficit reduction plan and long long, may he remain so.

    1. Mike Stallard
      March 19, 2014

      “He is way behind (thankfully) on his deficit reduction plan and long long, may he remain so.”
      I don’t understand. Why is is wrong to try and get out of debt?

      1. acorn
        March 19, 2014

        Because it is not a debt as you would understand it. The government, being a fiat currency ISSUER, always spends on its credit card, which has no spending limit. It uses the same credit card to pay off the bill each month. A currency USER, like a household or any country in the Eurozone can’t do that. Their credit cards have spending limits and have to be paid off with “money” each month. The governments money is basically a tax credit instrument. The government insists on having its taxes paid with its own issued currency; so you are obliged to get some of it.

        Whatever the “deficit” or “national debt”, the government eventually gets it all back through taxation, every last penny it ever spent into existence from its credit card. I say eventually because at any moment the non government sector is holding on to a lot of it. They are saving it. The nation debt is the private sector’s (including the rest of the world) households and firms SAVINGS, pound for pound.

        The government likes to pretend it is like a household and has to borrow money to pay for its spending. Why would a fiat currency issuing government, borrow its own money, that it had spent into existence in the first instance; it could just spend more on its credit card. The private sector can’t buy government debt (Gilts) or pay its taxes unless the government has already spent the money into existence in the private sector.

        Such a government does not have to issue debt instruments (Gilts), it chooses to do so, it is a throw back from when we were on the Gold Standard, it is not an operational requirement of a fiat currency system. Similarly, taxes are used to control aggregate demand in the economy. Taxes do not directly “pay” for anything; the government always spends before it taxes anything or anybody. Also, the natural base rate of interest in a sovereign fiat currency economy is ZERO.

  12. Brian Tomkinson
    March 19, 2014

    JR:”Public borrowing was forecast at £111bn in 2013-14, and at £96bn next year. ”
    I prefer the word ‘government’ to ‘public’ in that context. Just like the nonsense talked about the 2012 Olympics being delivered on budget, when that budget was continually increased and the final figure was many multiples of the initial one, the deficit, which Osborne promised to eliminate by 2015, is nowhere near where it should be. Osborne is more interested in playing politics rather than good stewardship of the economy. Such a pity that because he is Cameron’s best mate that he was given that job.
    Never mind, we are told that he is going to announce the introduction of a new pound coin in 2017 ( that year again!). According to the Telegraph: “Every shopping trolley, vending machine and phone box in Britain will have to be changed before the new £1 is introduced, the head of circulation for the Royal Mint has indicated.
    The cost to the economy of changing the coin-operated mechanisms across the country is likely to be £15 to £20 million, Andrew Mills said. ”
    You never know he may also announce a scheme to dig millions of holes around the country and then fill them in again.

    1. alan jutson
      March 19, 2014


      No need to dig the holes, we have millions of them already in our roads, causing so much damage to cars, and people on bikes that Councils are spending £millions on compensation payments, instead of filling them in.

      1. bigneil
        March 19, 2014

        How many people are kept in garage employment (income tax) doing the repairs -and also the VAT on the repair bills -is there a method to the govts madness?

  13. Kenneth R Moore
    March 19, 2014

    Steady as she grows – the Budget today

    Shouldn’t ‘grows’ be in inverted commas – I don’t believe the economy can be described as ‘growing’ when the growth is paid for by borrowed money. If Mr Osborne puts 100 or so billion into the economy, it would be very surprising if it didn’t result in some growth in the figures at least. How much of the ‘growth’ is in non jobs and other government waste.

  14. Bob
    March 19, 2014

    Mr Redwood,
    Do you think the UK should consider reopening coal fired power plants to reduce our dependence on Russian gas imports and unpredictable wind turbine output?

    Reply You may recall I opposed thier closure. They are taking them to bits so soon we will not be able to reopen.

    1. Bob
      March 19, 2014

      Reply You may recall I opposed thier closure. They are taking them to bits so soon we will not be able to reopen.

      Could you suggest to your leaders that dismantling be deferred until the political situation becomes more stable or until we have more reliable alternative generating capacity in place?

  15. Gary
    March 19, 2014

    FT Editor Gillian Tett
    claimed on Newsnight that the
    British economy is “on a sugar
    rush” and is “pumped up with
    cheap credit” with growth an
    illusion. She said it would either
    end in “a recession” or “high
    inflation” as something would
    have to give. Probably just after
    the 2015 election.

    She’s got that right. The only truth about govt is that they never stop lying.

  16. Gary
    March 19, 2014

    Allister Heath cuts through the lies:

    ” We would have gone bust and had
    to beg for a bail-out had we
    joined the single currency and
    been unable to rely on
    quantitative easing. The UK
    economy continues to rest on the
    bed of nitroglycerine first
    identified by Bill Gross, the US
    investor, in 2010.
    It gets worse. The Government
    has increased its own debt burden
    so much that this has more than
    compensated for the deleveraging
    by families and private firms.
    General government debt has
    reached 90pc of GDP, up from
    43.5pc when the crisis erupted in
    Combined UK private and public
    debt (as ever, excluding the
    balance sheets of City banks)
    therefore reached a recent
    record of 298pc of GDP at the
    end of last year, higher than the
    eurozone average of 268pc.”

    and if you include City debt we are at a TOTAL debt if 1000% of GDP, according to Morgan Stanley. The highest in the developed world.

    1. Brian Tomkinson
      March 19, 2014

      Sadly, our eminent host has not proffered a reply. Perhaps we should therefore assume that he doesn’t take issue with any of your remarks.

    2. petermartin2001
      March 20, 2014


      It doesn’t make much sense to add the debts of the government and the private sector. They are generally mirror images of each other on the graph.

      For example if you received a tax rebate of £500 your debt would fall by that amount whereas the governments debt would rise by £500 when they issued the cheque. Adding the two debts together shows no change.

      For the government to have zero debt they would need to claim the financial assets, in their entirety, of everyone else. No-one else would have any money and everything would still sum to zero as it does now.

      1. Gary
        March 20, 2014


        It is not a zero sum game, with all debt arising from govt and just see-sawing between govt and private as govt money seeps into the economy and back again.
        The banks lend directly and separately both to govt and the private sector.

        1. petermartin2001
          March 20, 2014


          It has to be a zero sum game.

          If you think of a new currency which is starting off from scratch no-one starts off with anything. The Government print some currency creating asset liability pairs. They keep the liability when they spend it. Whoever receives it acquires the asset. Assets = Liabilites as all accountants know!

          There is no need for the Government ever to borrow back their own currency which they, and they alone, have created. The banks don’t issue loans to government like they would you or I. They put their excess reserves on deposit at the BoE and can withdraw them at any time. Or they buy bonds which usually give them a better interest rate.

  17. Robert Taggart
    March 19, 2014

    Scroungers spurned stillmore !…
    No increase in income- in line with inflation – just the 1% already announced.
    No increase in capital threshold – still at £6K for the lower rate – for the fourth year running.
    No help for the Blighty economy – once we have saved – we would spend !

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