There has been a lot of nonsense talked about budgets for the next five years. The Conservatives have set out their plans in the last 2015 Budget book from the Treasury. Few seem to have read it, so here is a reminder.
The aim is to eliminate the budget deficit. Spending will rise from £737 billion (£11,497 per person) to £797 billion (£12,434 per person) , an increase of £60 billion. Taxes will rise from £602 billion (£9391 per person) to £746 billion (£11,638 per person). This will more than remove the deficit after other income is taken into account. The rise in tax revenue comes from growth in the economy, not from higher tax rates.
Spending is effectively frozen for the first couple of years. The rate of cash increase should keep up with pay, prices, and productivity growth, given the current low level of inflation. There is no need for there to be a real terms cut, unless inflation takes off. This allows for the extra £8 billion for NHS spending.
Revenue will grow well assuming as the Treasury does that the economy continues to grow faster than 2% per annum.
So we can sum up the last five years and the Conservative plans for the next five years in two simple rounded figures – in each of the 2 Parliaments, spending goes up by one thousand pounds per per person,and tax revenue goes up by two thousand pounds per person, eliminating the need to borrow any more.
April 25, 2015
“The rise in tax revenue comes from growth in the economy, not from higher tax rates.”
Fine but nearly all Cameron’s policies are against growth in the economy. Particularly growth in productivity and growth per capita. With the bloated, over paid, over large and largely incompetent state sector, expensive religious energy, over regulation of almost everything, hugely high taxation rates, restrictive planning, open door unskilled immigration, poor education and health systems, endless waste on HS2, the electric car religion and similar daft schemes, incompetent defence procurement, the endless left wing, drivel, large state/pro EU/greencrap propaganda of the BBC, a lack of competition in banking …….
No wonder HSBC may leave, indeed why they are still in London it is against shareholders interests? If Miliband gets in (as look likely thank to Cameron’s lack of vision) with his attacks on non doms and proposed theft from landlords of their properties the prospects for growth will get even worse.
April 25, 2015
Lifelogic has summed the situation up perfectly. The news that banks are thinking of leaving is just the start of the rot. With the very real prospect of the break up of the union England must start to wake up. We should be taking advantage of the prospect of cheaper energy in the form of gas (fracking, wash my mouth out) and investigate the possibility of a new oil find. Heathrow is crying out for a new runway and this would benefit the country more than HS2 would. All this taxing of the wealthy will result in more people leaving just as happened in France. The election campaigns have been truly pathetic and last night turned into a kindergarten argument over refugees from Libya. Just makes me want to switch off and hibernate until it’s all over.
April 25, 2015
If only we could increase productivity. It was said on one of the many political programmes I watch that the UK’s productivity is 20% less than that of France, yet rarely during this campaign, do the politicians even mention it.
Tad
April 25, 2015
It is rather difficult to become more productive with a the huge weight of the bloated state sector, over regulation of everything, over taxation, dysfunctional rip off banks, expensive.quack religion energy and absurd planning restrictions hung round you necks by the UK and EU governments.
April 26, 2015
With low plenty of job applicants from low income countries and tax credits for employees, why invest in productivity? With high and rising energy costs and the highest carbon targets in the EU, why invest in automated production, chemical, metals and refining in the UK.
April 25, 2015
JR, you seem to think that we should believe what the Tories have written. You fail address the central issue of trust. Moreover if there is any good faith in delivering any of the pledges. Look at Cameron’s words five years ago against his delivery. It is not just that circumstances changed beyond his control, you simply cannot believe a word he says. For example, economy, tax rises versus spending cuts, all important matters EU, immigration (despite the public overwhelmingly wanting something done about it), public services, Middle East wars and constitutional matters such as boundary changes, right to recall, standards at Westminster, and recently EVEL.
In fact, I find his weasel words about English nationalism hypocritical and offensive cosnidering his negotiations/give aways of Englsih taxpayers’ money to Scotland before the referendum, his actions could only be viewed as fueling Scottish nationalism!
Your manifesto is worthless, as is the word of Cameron. I note Merkel wants the countries with the biggest economies to take more asylum seekers. Cameron claiming the navy will drop people off in Italy. With free movement of people in the EU it only means a different route to the UK.
One more week and he will be out, thank goodness.
April 25, 2015
Cameron is indeed a dreadful, wet, ratting socialist but Miliband will be even worse. His proposal to thieve off landlords and get rid of the non-dom tax system will both reek economic havoc. It will damage tenants too and limit the supply of rental properties. The sort of absurdly damaging economics we have come to expect of most lefty Oxford PPE loons.
Why is the BBC not pointing out this is just a form of theft? That will damage tenant as much as landlords. Also what banks will lend to build new properties on this basis? Not that we expect very much from the BBC.
April 26, 2015
This morning, my fears about rent controls came true. T Fortunately, most of my properties are unoccupied, except for one. RedEd is proposing to limit rent increase to inflation. In my one occupied property, I pay the tax, water, power and tv licence and the costs of these have increased greatly. This was because the tenants frequently left without paying bills. I have put up with a low rent and not increased it for 10 years because the tenants have been exellent. Now I have to find the documents and end the tenancy as soon as possible.
April 25, 2015
I may be wrong, but given the fact that the BBC emphasised ‘leaving the EU’ as one of the reasons HSBC were thinking about moving, I can’t help thinking that was a very minor reason but has been beefed up to coincide with Labour’s election campaign.
Have they mentioned where they might move to? Could it be Frankfurt perchance? If so, it would be interesting to see if there was any EU-driven incentive.
Reply HSBC is not looking to move to any EU centre other than London – the other choice is Hong Kong. The issues are tax and regs, not EU membership
April 25, 2015
With regard to HSBC, their Chairman said: “One economic uncertainty stands out, that of continuing UK membership of the EU. In February we published a major research study which concluded that working to complete the single market in services and reforming the EU to make it more competitive were far less risky than going it alone, given the importance of EU markets to British trade.”
Reply Why then is HSBC not even considering moving to any EU centre in the Euro and committed to the whole project?
April 25, 2015
Reply to reply:
That is the key issue – what HSBC is blustering about is the increasing regulation and restrictions which the EU Directive/regulations are requiring member states to adopt. It really is nothing much to do with whether or not the UK leaves the EU. In fact one could argue the other way – that it could be to the UK banking industry’s advantage to be outside the EU. At least we would have a say at the top table of negotiations on the banking industry instead of being represented by the EU, which has many other interests besides the UK’s to consider. It is not a secret that many key players in the EU wish the banking hub of the EU not to be London but Frankfurt for example.
April 25, 2015
If HSBC moves its HQ, it seems to me it will be to the new centre of economic gravity – Asia. Singapore looks like one possible destination. Hong Kong may have too many political uncertainties.
April 25, 2015
sjb, wasn’t that comment about the EU much further down the list of gripes than the punishing effects of bank levies plus increasingly tight regulation, much of which is actually coming from the EU?
In fact the EU isn’t even mentioned in the FT report here:
http://www.ft.com/cms/s/0/265619cc-ea59-11e4-96ec-00144feab7de.html#slide0
And as JR says, if being headquartered in an EU member state is such as crucial factor for HSBC why are they talking about shifting outside the EU to Hong Kong rather than to a city in a member state which is unlikely to leave the EU for as long as it still exists, shall we say Frankfurt?
April 25, 2015
It’s mentioned elsewhere in that day’s FT[1], Denis. Apparently the UK levy – notice not EU levy – cost HSBC £750m in the past year.
The quote I gave comes from page 7 of the AGM statement.[2] On the same page it states the Board has asked management to identify the best place “for HSBC to be headquartered”. Wouldn’t Hong Kong carry political risks for HSBC?
[1] http://www.ft.com/cms/s/0/6e13286e-ea6c-11e4-96ec-00144feab7de.html#axzz3YMEo2vsG
[2] http://www.hsbc.com/investor-relations/investing-in-hsbc/annual-general-meeting?WT.ac=HGHQ_Hir5.0_On
April 25, 2015
We hear major manufacturers, including most recently Ford, constantly complaining about the UK possibly leaving the EU yet when Ford closed their Transit factory in Southampton they moved production OUTSIDE the EU to Turkey ! Such hypocrites !
There is no way that HSBC is going to move to Frankfurt, the obvious second choice. If they go at all, they will go to Asia where they can probably negotiate their own deal on corporation tax and light regulation.
April 25, 2015
Lifelogic – The SNP/Lab prospect can be fought off if an immediate referendum on the EU is pledged.
The migrant issue has reached a critical point of no return and the people must simply have one final say on the matter.
As for EVEL. A complete distraction and farce so long as we are ruled by the EU.
April 25, 2015
2017 is far too late.
April 25, 2015
Cameron will never do that he clearly prefers to lose a second sitting duck election.
April 25, 2015
Taxes will still fall short of spending according to John’s figures.
So I was just wondering what “other income” the Conservatives are relying on that is not included in taxes?
National insurance
Income tax
Business rates
VAT
Corporation tax
Excise duties
Council taxes
Stamp duties
Vehicle excise duties
are presumably all included in taxes.
I presume that profit or loss on sale of assets including bank shares etc. are not included as regular income and by comparison cost of EU membership is only about 20 billion a year.
HS2 won’t produce a profit.
So what other £50 billion of annual income am I missing to eliminate the deficit?
Reply The other income is trading income of the state from fees and charges
April 25, 2015
So are we to conclude that state fees and charges are reckoned to increase by an estimated £800 per person (man, woman and child)? Wow!
Reply No – and it is trading surplus etc on public activities
April 25, 2015
Con/Lab and Libdems are proposing to tax more by cracking down on tax avoidance. As tax avoidance is legal and responds to laws made by politicians, it will be interesting to see what measures will be taken to change the legal allowances.
The head of HSBC looking terribly pissed of when MPs were putting him on trial for his legal tax matters, made when he was working abroad. It would not be surprising if he went back to the office wondering whether it was worth staying here, with such a bunch of nincompoops showing off their lack of understanding of laws enacted by themselves.
April 25, 2015
It is galling that MPs have the cheek to question anyone else on tax, salaries, expenses or standards! Quite outrageous when you consider the lack of progress to reform the institutionalised self interest, greed, abuse of position at Westminster for all kinds of activities. Would any organisation be allowed the time frame to conduct an inquiry so important to the loss life of life like Chilcot? Rotherham scandal? NHSMid Staffs, people and politicians still in office! We all read the allegations about Lord Janner last week and are still waiting for the all incompassing inquiry about child abuse, by MPs and others, and cover ups by the establishment!
April 25, 2015
Indeed there has been a huge growth in fees and (fines if late) for state sector “services”. Such services as the fines for being a minute over on a parking meter or putting a tyre into an empty bus lane or a second, or filing your company accounts or tax return late because you were ill, too busy or lost some papers.
Not that these services have got any more efficient as we saw at the passport office.
April 25, 2015
Are these figures for spending per person, tax and growth calculated to include the likely increase of population by 1.5 million, with the proportion of British emigration and gross immigration taken into account, with their relative productivity?
Reply They are the actual and official forecast figures divided by 64.1m, the latest population figure for the UK I could find.
April 25, 2015
As much of the growth in GDP seems to come with the population increase, perhaps the figures should be adjusted.
April 25, 2015
Indeed GDP per cap is what matters to voters.
GDP matters to government as it means they have a bigger cow to milk. But then if the immigration is mainly low paid they are clearly a net liability to the state anyway – with the cost of health, education, defence and the rest of government apportioned.
If spending goes up to £12,434 a family of four will have to pay nearly £50K in tax perhaps from minimum wage earning of £10K PA or even £20K if both are working full time, it seems unlikely.
Even less likely if they choose bring their elderly parents perhaps with health problems with them too.
April 25, 2015
Exactly!
Yet trying to make the politicians see that, is nigh impossible. Would Australia allow people into their country who are going to be a drain upon the country’s wealth I wonder, and then bring in their dependants too?
Time we were selective about who comes to the UK, but it looks like the British people are about to elect more of the same old tired, clueless politicians who have given us this mess. We don’t change anything with sticking with the same political parties when we really need a revolution in British politics.
Tad
April 25, 2015
Yesterday evening at an election meeting one of the pro-immigration candidates claimed in an aside that immigration had increased our economic growth rate by 0.2% pa, as I recall the cited figures were an increase from 2.2% to 2.4%.
But then net immigration of 300,000 pa would increase the population by over 0.4% pa, before taking into account the further increases later on when those new arrivals who had arrived without children started families.
Moreover the comparison should really be with the increase in the workforce, not the whole population including children and the elderly and the disabled, and on that basis an increase of 1% of the workforce is apparently producing only an 0.2% increase in output.
One of the flaws in a much cited academic study was that a comparison was made between the productivity of recent immigrants and that of the population as a whole, when it should really have been between that of the recent immigrants and that of just a segment of the established population with a similar age distribution to the recent immigrants, who are disproportionately of working age at the time of their arrival in the country.
April 25, 2015
Reply to reply: How can there be a 5 year plan ?
You have no idea of how many people are going to be here or what they will bring, take, cause, cost or earn.
Mr Cameron’s claim “we will not take Syrian refugees” is as hollow as “WE WILL REDUCE IMMIGRATION – from outside the EU”
With him you have to listen to the small print.
There is an issue of distrust here and it’s no good scare mongering about Labour when migration under the Tories has been worse.
And 2017 for a referendum ? By then it could well be too late with recent events in the Med.
Reply There is always an official five year plan for spending and tax, updated at every budget
April 25, 2015
Reply to reply (thanks)
Perhaps we should compress all plans to shorter terms as things are changing at an unprecedented rate.
April 25, 2015
Reply to reply: the fact that there is always a five year plan, is no answer to Mondeo. Your answer, I believe, was unfortunately expressed as it seems to be that you just accept a five year plan because it has to be done, but blow whether it is accurate, something which I am sure you do not really believe.
As MM states, you cannot possibly plan with any degree of accuracy (and judging on government past estimates with wild inaccuracy) for the infrastructure etc needs rising from populations growth. This all points to the vital (literally) need for a points system for immigration so that we are in control of the numbers that come into our country.
April 25, 2015
You actually need a 24 hour plan – not a 5 year plan – what with policy being dictated by BBC 24 Hour Rolling Baloney journalists and spoilt Hollywood actresses.
Farage talks directly to the public and ingores the opinion of the BBC. That’s why he’s doing so well.
April 25, 2015
Tower Hamlets deputy councillors say they do not accept the ruling and will appeal. They think the mayor is popular, has a good housing policy and is honest. Who will pay costs if they win at appeal?
etc ed
April 25, 2015
stred
Clearly he will be popular with some people, probably those who benefited from his position. !
Draw your own conclusions.
April 25, 2015
At least the judge had the courage to say the law applies to everyone. It is about time politicians made this point absolutely clear about Sharia law or any other form quasi judicial justice in the public domaine. People afraid of being labelled racist is partly responsible fort he inaction of the Rotherham child abuse. Why have the politicians not taken clear decisive action in this case rather than leave to individuals? Why have they still not sorted out postal voting at elections? LibLabCon cartel are political cowards; they deride and label UKIP, and its supporters, which actually fuels these substandard practices taking place in our country.
April 25, 2015
Alan. The ‘etc’ was my conclusion, but was not acceptable in today’s climate.
April 25, 2015
And once you have eliminated the deficit, what is the plan for paying off the £trillions of debt to overseas lenders that Osborne has run up in just 5 years?
April 25, 2015
Seems to be somewhat selective, as ever. Round here a UKIP fellow was prosecuted for what at worst was idiocy (out of the public purse).
April 25, 2015
Handing out sausage rolls to individuals. You couldn’t make it up with regard to the priorities of our justice system.
April 25, 2015
Do you mean offering sausage rolls away sausage rolls free of charge?
April 25, 2015
What is the National Debt forecast to be compared with now, at the end of the next parliament? Will more borrowing be required to cover the interest on this? Is debt service included in your figures?
Reply Yes, debt interest is included. Debt figures have been published and I have written about them before.
April 25, 2015
Once again your Party has failed to get any of this information across.
Meanwhile the media and other Party’s tell us the Conservatives will deliver more and more austerity, a popular new phrase for living within your means.
But above all none of these so called cuts/ austerity programmes would be necessary at all, if Labour had not got us into a large deficit in the first place.
Your team are failing to score in an open goal John.
April 25, 2015
The plural of party is parties, not party’s. You must have had a socialist ‘education’.
April 26, 2015
Bob
Not socialist, just a bog standard secondary modern.
Never really did get to grips with proper English, still haven’t.
Was good at Maths and sport though.
However my education, and further study for 8 years at Poly Tech both Fay release and Night School taught me how to make a living for myself, my family, and also to employ other people in my business.
Shame our education system has failed so many in the past 40 years after being treated like a political football by the so called better educated.
April 25, 2015
When is real austerity beginning to start? How do we compare with Ireland?
April 25, 2015
This would be more credible if they had kept to the promises to eliminate the deficit made in 2010.
April 25, 2015
Well set out. It’s a pity Conservative front bench spokesmen aren’t so clear. Hopefully Mr Crosby reads this and can send your post as a briefing to all Conservatives likely to appear in the media.
April 25, 2015
For clarity, JR, do your numbers take into account inflation?
If CPI increases by the present target of 2% pa then over 5 years that means prices will increase by 10.4%, and when I apply that to your present £11,497 public spending per person that inflates to £12,694 which is a bit above your projected £12,434.
So would it be true to say that the Tory manifesto is projecting increases in overall public spending per person slightly below consumer price inflation?
But then you say above that for the purposes of your calculations you are assuming a static population, when we know that it will increase and therefore shave something off your projected public spending per person.
According to ONS population projections that would take your projected £12,434 down to about £12,068, which would mean an erosion of about 1% pa in real terms.
You will understand that I am only seeking clarification, not necessarily criticising.
Reply As I explained these are cash figures. Inflation is currently zero on CPI,so there can be real increases in pending on these cash figures if inflation stays low. No one is forecasting 2% plus inflation anytime soon.
April 25, 2015
The Red Book is worth a read, all the numbers are in there! https://www.gov.uk/government/publications/budget-2015-documents . To save time, start at Chapter 2, then Annex B and C.
In short, government spending in TME cash terms, will increase circa 1.63% a year, over the next five years; most of it in the last two years (for reasons which are not clear, except for a pre 2020 election boost). So in REAL terms, choose your own level of inflation and subtract from 1.63%. By comparison, average annual REAL growth in Total Managed Expenditure (2010-11 to 2014-15) has been minus 1.1%.
It does to me, seem a little rediculous that politicians are speaking to the voters in riddles and lies; juggling apples and telling us they are pears. Numbers for this and that, needing the likes of the IFS to try and guess what they are not telling us!
Reply Not so. The official figures dhow real increase in spending and in contribution to the economy from the public sector 2010-15
April 26, 2015
Red Book Table 2.3: Total Managed Expenditure, Memo item:
“Memo: average annual real growth in Total Managed Expenditure (2010-11 to 2014-15): -1.1%”
Reply: The real growth comes over the whole five years of the coalition with 2009-10 as the base, the last Labour year! You are trying to fiddle the figures by leaving out the Coalition’s first year, the year of its largest spending increase.
April 25, 2015
CPI is a backward-looking measure, prices now compared to prices a year ago, and there is no reason to suppose that it will still be zero in a year’s time let alone in five years’ time. As we know it shouldn’t be, if the Bank of England does the job that Parliament has told it to do through one of its Acts then CPI should stay close to the 2% target set by the Chancellor.
April 25, 2015
A friend of mine tells me the local job centre informs her she is officially working ‘full time’ …. despite working just 20 hours per week.
Before getting this job she was encouraged to take up the Coalitions new ‘Enterprise allowance’ for self employed people. Despite still being unemployed she was off the unemployment record. …
A long serving colleague of hers at work (working 38 hrs per week) was made redundant and replaced with 2 part time workers doing 20 hours – each receiving government top ups. I suspect this isn’t a common occurrence.
I wonder how many jobs are being split up and part time workers counted as ‘full time’. Might explain Mr Cameron’s so called jobs miracle.
There isn’t anything like 2 million new jobs – many re-hashed old ones on less hours that have to be subsidised by us..and unemployed persons claiming to be self employed to claim enterprise allowance..
The ‘recovery’ is built on very shaky ground indeed….
Reply not so Most of the new jobs are full time
April 27, 2015
Reply not so Most of the new jobs are full time
The ONS define a full time job as ‘Employees working more than 30 hours per week (or 25 or more for the teaching professions).
http://www.ons.gov.uk/ons/dcp171778_335027.pdf
Most people would regard 37 or more as full time hours…..
April 25, 2015
Off-topic, according to this summary of 16 polls published in the past week:
http://ukpollingreport.co.uk/blog/archives/9375
nothing much has changed; Labour and the Tories are still about level pegging, despite Tory strategists conjuring up the terrifying spectre of a Labour/SNP coalition and all the other anti-democratic campaigning trickery on both sides; as for UKIP it has averaged a rating of 13.7%, up by a statistically insignificant 0.6% from last week, despite Cameron’s heartfelt plea for his lost little sheep to return to the Tory fold.
It seems to me that in the over-riding interests of smoothly providing the country with a stable and coherent government for a few years it might be a good idea if Cameron and Miliband were to sign a formal agreement that whichever of their parties happens to win the greatest number of seats will form the new government and the other party will allow it to pursue the policies stated in its manifesto.
That is how the Labour and Tory parties agreed to resolve the problem of a House of Lords dominated by the Tories after Labour had won a massive Commons majority in the 1945 general election, the so-called Salisbury Convention:
http://www.parliament.uk/site-information/glossary/salisbury-doctrine/
“The Convention ensures that major Government Bills can get through the Lords when the Government of the day has no majority in the Lords. In practice, it means that the Lords does not try to vote down at second or third reading, a Government Bill mentioned in an election manifesto.”
There is no reason why that kind of civilised arrangement could not be extended to the Commons for a few years, given that at present neither party seems capable of gaining enough public support to secure an overall majority.
It would however require both Cameron and Miliband to behave like patriotic statesmen, rather than just the leaders of two competing political gangs.
April 25, 2015
Surely the Salisbury Convention was appropriate for the overriding reason that it prevented the House of Lords thwarting the will of the people, given form in the composition of the ‘Commons? (And I suppose to avoid resorting to more disruptive measures of the like of creating many new peers etc..)
Clearly, similar considerations would not apply in the case of a deadlocked ‘Commons and so it must be doubted any similar deal that “ensures that major Government Bills can get through” would be favourably viewed by MPs. Perhaps a deal to allow bills essential to continuing governance might be contemplated, but in the face of lack of public support for its opponents’ measures would it be proper for any party to agree to facilitate anything more?
April 26, 2015
Well, I’m not seriously expecting anything like it to be agreed before the election, not because of any constitutional niceties but simply because it would be against the short term interests of the Tory party.
Imagine if tomorrow Cameron made an offer to Miliband, that his party would allow a minority Labour government to fulfil its manifesto pledges provided that the Labour party would agree to a reciprocal arrangement if it happened that the Tories were the largest party after the election and they formed a minority government.
That would immediately lay the spectre of a Labour-SNP coalition or a Labour government propped up by the SNP and being controlled by the SNP, when raising that spectre has been one of the main tactics adopted by the Tory party during the election campaign.
April 25, 2015
JR wants to “eliminate the budget deficit” as apparently does most of the Westminster village. As Simon Wren-Lewis (Oxford economics prof) explained, politicians haven’t the FAINTEST idea what they’re talking about on this issue. See:
http://www.newstatesman.com/politics/2015/04/economic-consequences-george-osborne-covering-austerity-mistake
Just one very simple mistake politicians make here is thus. Assuming the national debt and monetary base are to remain constant relative to GDP in the long term (which they do more or less), then they have to be TOPPED UP regularly. And there’s only one way of topping them up, and that’s a deficit. Plus the size of that “topping up” element in the deficit is quite significant: about 3% of GDP.
The topping up is needed for two reasons. First, given the 2% inflation target, the debt and monetary base will shrink in real terms at 2%pa. Second, given real growth (which averages 1-2%pa) then even more topping up will be needed if the debt and base are stay constant relative to GDP.
Canada has been running a deficit since 1870 (yes that’s 1870, not 1970). Has the sky fallen in in Canada?
There’s plenty more nonsense coming from politicians about the deficit, but I better stop now.
Reply So why didn’t the Greek experiment with large deficits work?
April 25, 2015
How on earth can our deficit be reduced when you, as a conservative JR, are advocating spending more ? If my credit card was up to its maximum and I could not pay it off the logical answer would be to STOP spending on it and try and live within my means.
You hope that inflation with rise, I suppose, which will reduce the deficit but that would take some years to achieve given that your spending on HS2 and other idiotic ventures will not bring in any surplus until they are up and running and even then this is debateable.
April 25, 2015
Excellent Sandra! And no need for anyone to point out what each of those places have in common.
Illicit practises are totally wrong and abhorrent to anyone who believes in democracy and inequality, but I guess the ones who are the least likely to push for the problem’s resolution, are the same people who are most likely to benefit from it, as in the past. Otherwise, it would have been acknowledged much earlier, and properly sorted by now.
What a fantastic contribution some parts of the community make to this once green and pleasant land.
Tad
April 25, 2015
The trouble with 5 year plans is they are too short . It is not possible for planned results to occur in the lifetime of a Parliament – it is one of the reasons I have mentioned before that our electoral system should be modified . Most capital intensive organisations use periods of 7 – 10 years in their planning with reviews along the way .
April 25, 2015
Regarding the legal age to vote being dropped to 16. Don’t follow in the SNP’s footsteps by allocating a state guardian up to the age of 18 and allowing them to vote at 16!!
What experiences in life do 16 year olds have? Driving licences are not allowed until they are 17. Giving them the right to vote at 16 opens up all other areas where they will say if they can vote they can do numerous other things.
April 25, 2015
What is this thing with Five Year Plans? Are we living in the Soviet Union? Why do we never see four year plans or six year, six month and three days plans? Is five a magic number?
April 25, 2015
Mr Redwood,
Your governments assumes there is a credible chance that tax revenue and growth come in as forecast. Do they also believe in fairies at the bottom of the garden. ?. Wasn’t the deficit supposed to be eliminated by now until we were told that the forecasts were all junk.
Why should we believe your party now ?. Your party is just desperate to cling onto ‘power’ and is prepared to stretch the truth beyond breaking point to achieve it.
April 25, 2015
If only… Dream on. Five years ago the deficit as of now was projected at circa£35b. Currently and on a monthly basis we are short to the tune of say £7b. So if I understand the article correctly a future Tory Government will recover over £80b – from Government charges and other income. Nobody appears to have the courage to explain what this additional income amounted to during the last five years. Its always going to happen tomorrow.
Clearly this blog should be kept for the future
Reply Trading surplus on nationalised activities etc.
April 25, 2015
One answer might be a cross-party corpus of Commons MPs from the back benches who will work together to address constitutional issues, since it is clear that the Party leaderships are not much use in this area.
April 25, 2015
Off topic but nowhere else to comment.
Votes at 16? Why? Most are still children at that age, they have little or no experience of adult life, they have not completed their education, they are not allowed to fight in the army and, in a word, they are immature. That the law recognises them as adults for sexual relations is immaterial.
There are some 14 year olds who are knowledgeable enough to form a reasoned political opinion – do they deserve a vote?
April 25, 2015
There are some big issues that are being ‘glossed over’ here in my view or just ignored completely. Sooner or later the politicians have to be honest enough to tell us we are still consuming in a way that cannot be sustained by our debt soaked economy.
Only outsiders like Tim Morgan seem to be talking about the really big issues – but get largely ignored as they are ‘off message’.
For now we have used debt and asset sales to fill the gap between consumption and production….how long can this continue ?
Yet this government has encouraged this consumerism at the same time as turning it’s back on well paid, high value added activities.
I don’t want to shoot the messenger here but the plan handed to JR to present is just complete tosh and not worth the paper it was written on . It is full of rhetoric about spending more money (we wont have) with nothing about getting more from less.
I don’t think even JR has much time or enthusiasm for this ostrich headed ‘plan’ to ‘extend and pretend’.
Comment on some of these issues would be more helpful :-
– Since 1997, manufacturing output has slumped by 26%..to be replaced by non globally marketable services that wont’ pay our way in the world ie ‘taking in each others washing’.
– Last year we spent £412bn on imported goods – a far larger figure than our exports of £293bn.How is that sustainable when we are running short of assets to sell…
-Current financial flows, in balance until 2011, have now turned negative to the tune of £27bn in 2012, £43bn in 2013 and £64bn last year. The latter formed the bulk of an unsustainable 2014 current account deficit of £98bn. Far more now flows out in interest and dividends than flows in.
-We have to borrow from overseas close to £100bn (and rising) each year just to balance the books, and, of course, each new debt taken on, or asset sold, worsens future outflows. It also means that the rest of the world now funds 6% of our GDP.
The situation is bleak – only a full blown economic crash will shake our politicians out of our complacency.
April 25, 2015
The per person rate will be lower because you have not allowed for immigrants coming in over five years, you might be right if same amount people as come in go out which is a high possibility.
As you say it only a plan,
So you are going to sit at around 1.675 billion of debt after five years and 375 billion of QE which is on BOE balance sheet, to be turn over to keep it at that amount. So the interest is 46 billion a year at the moment for the 1484 billion debt, so to keep it at 46 billion with another 190 billion of debt on top government bond will have go down, say the 10 year at 1,20 per cent and means you need to cut government interest rates to 0% and lower saving rates and keep them there for 5 whole years. You will need 10 billion a year from the of BOE still on the QE to keep your plan alive and then you have PFI which have go up for building of hospitals and schools, which is 225 billion at the moment, so say 240 billion.
It been 7 years from the last recession with another 5 year with out one, that will be one of longest time in history without one with economic growth at over 2.5% a year for the next 5 years.
With pension contribution limited to 1 million pounds which can not cut much more and assets for sale down you have got a lot left to play with. I will call it the throw of the dice.
I hear your going to do away with cash.
April 25, 2015
We are due for an almighty correction just after the election
We are poorly placed to deal with it. I forsee some real Greek style austerity before this year is out.
All 3 parties are throwing spending promises like men with no arms I think the voters are in for a shock
April 25, 2015
JR: “The Conservatives have set out their plans in the last 2015 Budget book from the Treasury.”
Really? I thought that was a coalition government budget – was I mistaken?
Why have so many of your leadership talked about the intention to raise £5bn from reducing tax evasion, cutting the welfare budget by £12bn (£10bn of which hasn’t been specified) and cutting other budgets by £13bn all unspecifed? Are these in that budget or not? Where will those reductions be made and how great will they have to be in those few departments whose spending isn’t ringfenced?
Please don’t take us for fools – a common failing amongst mainstream politicians these days.
Reply The government produced the usual 5 years forecast, but only the Conservatives signed up to years 2-5
April 25, 2015
Interesting piece by Daniel Finkelstein in the Times this morning showing how many MPs are incapable of simple mathematical computations. We are back to the problem of a screaming mass media and twitter sphere people by an innumerate majority of arts graduates. It is no wonder that debate descends into stereotypes and slogans.
One of my least favourite ploys is the averaging of percentages calculated on different base figures.
One oddity, though. What does one make of the MP who, speaking of education, says ‘we want the majority of people to be above average’. Sounds impossible. But nearly all of us have more than the average number of legs. Given that there are some one legged people in the population, the average is 1.9999!
April 25, 2015
Dear Mr Redwood, I know that you have only used the term “five year plan” as a shorthand headline for your post on the Conservatives’ medium term financial strategy but I fear that your party, along with others, really thinks that an economic strategy for this country is just about Treasury budgeting.
April 25, 2015
“Spending is effectively frozen for the first couple of years……. Revenue will grow well assuming as the Treasury does that the economy continues to grow faster than 2% per annum.
This isn’t realistic if spending is frozen without there being tax cuts too.
That increased revenue can only come from increased spending. So where are the private sector, if taxes aren’t cut, going to get that spending power from? The Government can’t induce them to borrow more by reducing interest rates. They can’t go any lower.
Can Britain increase its exports and find some spending power from overseas? This is much discussed but rarely achieved. Given the state of the EZ I would suggest it is unlikely without a big devaluation. That’s not a good idea anyway.
Therefore there won’t be any extra spnding power in the economy. There will be no growth under this plan. The assumption of 2% growth is realistic, or even a bit more, but there has to be tax cuts if spending is frozen. Otherwise it isn’t.
George Osborne has had five years to figure out what works and what doesn’t. He just needs to carry on what he has been doing to achieve that 2.5% growth. As inflation is so low he can safely spend more, and/or tax less without there being any problem.
Reply Why cant you understand that private sector credit through commercial banks can and does expand. We have good growth at the moment and falling deficit, owing to private sector expansion
April 27, 2015
JR,
I do understand that private credit can expand. I also understand that when it does expand it can lead to increased economic activity which does reduce the government’s deficit as you indicate.
But, that credit also creates financial liabilities in the private sector as well as financial assets. Liabilities are initially equal to assets – to the penny. As the assets are spent they are gradually trapped, on each transaction, in the governments very efficient taxation net, which is the reason for the reduction in the government’s deficit. So the assets dwindle but the liabilities remain. The private sector after a while ends up poorer.
This creates a danger of increased economic activity turning to decreased economic activity. A boom turning to a bust. Of course, the government, or the central bank can then reduce interest rates to stimulate new lending. That process has been happening for the last 25 years or so. Interest rates have been continually been reduced to enable the private sector to cope with the enormous level of debt it has accumulated.
Bank base rates are now at 0.5%. They can’t realistically go much lower. So what’s the next step to encourage credit creation? In fact should further credit creation, and therefore more debt creation, in the private sector be encouraged?
Reply At overall tax rates of 36-7% the private sector can and does get richer.
April 27, 2015
JR,
I don’t understand the idea behind your last comment. The private sector can only get richer ( ie be in surplus) if some other sector is in deficit. The oversea’s sector isn’t in deficit. It been a long time since they bought more from us that we did from them. That’s not likely to change any time soon.
So, for the private sector to become richer, be in surplus, the government’s deficit has to be bigger that the oversea’s sectors surplus.
You can get richer whilst being in deficit – assets are balance sheet items, not flows.
It’s just a matter of doing the accounts.
April 25, 2015
Made a mistake, according to your figures debt will rise from 1484 to 1611 billion and gross interest payments at moment are 33.6 billion a year, this year you loading a another 75 billion to the debt to 1559 billion and the year after 40 billion to 1599 billion and then 12.5 billion to 1611.5 of debt and then flat, interest on the debt going to rise from 33.6 to 51.6 which to me suggest that government interest rates will be going up about 1.5 per cent to 2 per cent which a 300 per cent rise, mortgages now 2 per cent to 3.0 per cent the rise will be between 75 to 50 per cent on interest of the mortgage.
I have a look at where the money is coming from and it usual trick of not much income tax, ni and vat this year or next but after that it shoots up, so income tax 14/15 162.6 to 216.5 19/20 which is about 54 billion in four years that 25% more than you are collecting now and tax cuts as well, lifting the tax band to before you pay tax 12.500 pounds and lifting the 40% tax band to 50.000 pounds that good going if I say so myself.
NI 14/15. 110.7 to 19/20. 142,7 in four years that 32 billion that about 30% rise and cut back on it for training under 25 year olds.
VAT 14/15 110.8 to 19/20 131.1 that 20.3 billion rise over 18%.
Corporation tax 14/15. 42 to 19/20. 46.6 a rise 4.6 billion 11%, one of the lowest.
Business rates 14/15. 27.3 to 19/20. 32 billion a rise 4.7 billion, 17 % rise.
Council tax 14/15. 27.5 to19/20. 31.1 that 3.6 billion 13% rise.
CGT 14/15. 5.7 to 19/20. 9.8 that 4.1 billion 73% rise.
IHT 14/15. 3.8 to 19/20. 6.4 that 2.6 billion about a 70% rise.
Stamp duty 14/15. 10.9 to 19/20. 18 that 7.1 billion a 65% rise.
Environment levies 14/15. 4.1 to 19/20. 9.4 that 5.3 that about 130% rise.
So corporation tax is the lowest and environment tax is the highest.
If he pull this one off I will give him a medal myself but by 2017/18 we will see if they win election, looks pie in the sky to me with the debt, I am forecasting over 1,8 trillion.
April 25, 2015
Then you got the cut to welfare and department 30 billion pounds and health is going up 8 billion in 4 years and school a little bit and other bits. 1 million hear 5 million there 20 million hear 50 million there mostly all waste.
April 25, 2015
….. eliminating the need to borrow any more
There’s no possible way it can happen like this. It won’t happen like this unless something is done about the import bill. There won’t be any surplus and there won’t be any growth in the economy either.
PS Remind me if I’m ever shown to be wrong about this and I’ll make a donation of £500 to which ever party achieves the impossible. I’ll also pledge to vote for no-one else ever!
April 26, 2015
Don’t forget to allow for imports of capital invested by overseas corporations and individuals in your theory.
As well as UK investments in overseas companies.
These affect the simple import export figures of trading of goods and some services.
April 26, 2015
One thing we know for certain about the economy is that some time in the future the economy will crash. We don’t know when or why, or how severely it will do so. All we know is that it will. Isn’t it time that political parties started publishing their strategies for dealing with this inevitability, instead of plans predicated on idealised smooth extrapolations of growth and a “Cor, stap me vitals, nobody expected that!” on the day the newspapers are running the “traders clutching their heads” stock photos?