Yesterday’s figures for September 2014 and the first half of the 2014-15 fiscal year show spending and borrowing on the rise.
Social security benefits are up by 5.4% on September a year earlier, despite the good progress in getting more people into work. Other current public spending is up by 3.1%. Capital spending is up by 42%. As a result of this substantial increase in nominal and real public spending, total borrowing so far this fiscal year is £58 billion, £5.4 bn more than for the same period last year.
VAT revenues are up by 4%. Capital Gains Tax revenues remain very depressed, owing to the higher rate this government has introduced. It is running at around half the level of the pre crisis peak in the last decade. PAYE income tax revenues are up, but so are tax credit expenditures. Overall tax on income and wealth shows no gr0wth at all. The combination of a good policy of taking people out of Income tax at the lower end, and the self defeating policy of trying to hit people with higher rates at the upper end has meant no rises in receipts.
Taxes on alcohol and tobacco are also failing to produce extra revenues. Petroleum Revenue Tax effectively disappeared in the last quarter. The government raised just £18 m in three months as oil prices fell and North Sea output dropped. Our EU contributions so far this year total £5.7 billion, and public sector pensions this September at £3.5bn were 28% higher than August or October last year.
In the remaining months of the year government needs to get a grip on its spending, and revisit its approach to taxing so it gets more by charging rates people will pay. A 20% Capital Gains tax should bring in more money, for example.