U.K. Public Borrowing Soars

[Victor McDade]

Ermm are we not meant to be cutting budgets left, right and centre - why is borrowing not coming down?

WSJ said:

LONDON—Falling income-tax receipts and higher spending pushed U.K. public borrowing to its highest August figure on record, but the U.K. government said it would press ahead with efforts to cut the public deficit.

The Office for National Statistics Wednesday said that public-sector net borrowing, excluding financial-sector interventions, rose to £15.9 billion ($25.02 billion) from £14 billion in August of last year.

That figure is the highest for this month since records began in 1993 and bad news for Chancellor of the Exchequer George Osborne, who is seeking to pare back the U.K.'s annual deficit with an £111 billion program of spending cuts and tax rises.

http://online.wsj.com/article/SB10001424053111903703604576584124153749848.html?mod=googlenews_wsj

[davepoth]

It's not as if they can turn the tap off straight away; there are still things being paid for that can't just be stopped. At the moment the government are trying to reduce the rate of increase of borrowing with a view to cutting borrowing ASAP.

[NorthernBoy]

The state of tax receipts is not helping either. I'd not be surprised if the 50% tax band is doing its bit to reduce government income.

[ringram]

Nothing wrong with some deficit spending to stimulate the economy in a recession.

[0a]

Because despite what the BBC, Labour and Guardian state, we are not cutting spending and won't be over the next few years. It has/will be going up in nominal terms and will be flat in real terms:

[url]



http://www.ukpublicspending.co.uk/downchart_ukgs.p...

[ninja-lewis]

You can't take one month in isolation. Public spending and tax revenues are seasonal so the budget can flunctuate from month to month just like any household. For example the Net Cash Requirement figure for August is £5 billion higher than last year but that's simply because an index-linked gilt was redeemed this August while last August saw the large one-off payment from the Bank Payroll Tax. Receipts from the new Bank Levy, on the other hand, are spread throughout the year rather than concentrated in any particular month.

If you compare the figures for April 11 to August 11 with the same period last year:

The public sector current budget was in deficit by £43.5 billion; this is £1.0 billion lower than in the same period of 2010/11, when there was a deficit of £44.5 billion.

Public sector net borrowing was £51.5 billion; this is £3.9 billion lower net borrowing than in the
same period of 2010/11, when net borrowing was £55.3 billion.

http://www.ons.gov.uk/ons/dcp171778_232138.pdf

[anonymous-user]

NorthernBoy said:

The state of tax receipts is not helping either. I'd not be surprised if the 50% tax band is doing its bit to reduce government income.

Why would that be?

[JagLover]

0a said:

Because despite what the BBC, Labour and Guardian state, we are not cutting spending and won't be over the next few years. It has/will be going up in nominal terms and will be flat in real terms:

This

and I am not sue people realise just how messed up the government finances are, it would take robust growth to close the deficit without massive shrinkage in the public sector and growth is slow, partly due to the state of the world economy, and partly due to the fact that after 13 years of labour this is not a good place to run a business anymore.

The coalition has taken a few good steps but there is still a long way to go and until the unions realise there is no more money it will be a bumpy road.

[NorthernBoy]

anonymous said:

[redacted]

Some people who are in the 50% tax band have a choice about where their jobs are based, and can relocate. There's a level at which people are prompted to seriously consider this, and 52% (the amount once you add in NI), or more than half of each extra pound you earn, is probably over that level for a lot of people.

It's probably not people upping sticks and moving that is the issue, though, but more often it's about where people go when they are moving jobs anyway. I have a fair few friends (some British, most not) who won't come back to work in London while the rate is so high. They'll take jobs in Tokyo, New York, or Singapore first. The treasure could be getting 40% of a million pounds from some of them, but instead is getting 50% of nothing.

They do the same job, for the same company, with the same customers, but do it abroad.

I was in Monaco last weekend, and found myself wondering whether to look into getting a job out there. It'd mean a bit of a sideways move, but it's an absolutely beautiful part of the world, great climate, by the sea, and it'd mean that I'd be taking home the same pay for half the hours worked. When looked at that way, why would plenty of people not do the same for a few years?

Of course, some people who cannot move are of course paying the higher rate, but it's not clear if it is enough to offset the tax foregone by people staying away. I suspect that it's marginal.

[JagLover]

NorthernBoy said:

Some people who are in the 50% tax band have a choice about where their jobs are based, and can relocate. There's a level at which people are prompted to seriously consider this, and 52% (the amount once you add in NI), or more than half of each extra pound you earn, is probably over that level for a lot of people.

It's probably not people upping sticks and moving that is the issue, though, but more often it's about where people go when they are moving jobs anyway. I have a fair few friends (some British, most not) who won't come back to work in London while the rate is so high. They'll take jobs in Tokyo, New York, or Singapore first. The treasure could be getting 40% of a million pounds from some of them, but instead is getting 50% of nothing.

They do the same job, for the same company, with the same customers, but do it abroad.

I was in Monaco last weekend, and found myself wondering whether to look into getting a job out there. It'd mean a bit of a sideways move, but it's an absolutely beautiful part of the world, great climate, by the sea, and it'd mean that I'd be taking home the same pay for half the hours worked. When looked at that way, why would plenty of people not do the same for a few years?

Of course, some people who cannot move are of course paying the higher rate, but it's not clear if it is enough to offset the tax foregone by people staying away. I suspect that it's marginal.

This graph says it all really



and in fact understates the extent of the problem by looking at a childless couple. Whereas the UK is fairly unique in the western world in not offering any tax allowance/child benefit to richer couples.

[0a]

Regarding taxation, as well as transferring abroad people also work less and take less stressful lower paid jobs. I worked in a role that had a monthly bonus element and I can honestly say that seeing most of the incremental £1000-£2000 bonus go in tax/NI does not help incentivise you to work harder and longer. I have also left a role that was very well paid but unenjoyable as the extra £x you see in the salary on paper just wasn't worth it when it hit my bank account minus the tax/NI. Higher tax will always mean a higher take from a smaller base, it's about finding the acceptable trade off and in my opinion we are far too far in the direction of high tax right now particularly as you look at the top band.

[tamore]

why do people think that a 13 year humping of our economic system can be undone so quickly?

[BrewsterBear]

0a said:

Regarding taxation, as well as transferring abroad people also work less and take less stressful lower paid jobs. I worked in a role that had a monthly bonus element and I can honestly say that seeing most of the incremental £1000-£2000 bonus go in tax/NI does not help incentivise you to work harder and longer. I have also left a role that was very well paid but unenjoyable as the extra £x you see in the salary on paper just wasn't worth it when it hit my bank account minus the tax/NI. Higher tax will always mean a higher take from a smaller base, it's about finding the acceptable trade off and in my opinion we are far too far in the direction of high tax right now particularly as you look at the top band.

Indeed. I earn circa £50k but could earn £60+k if I did some overtime. Where is my incentive to do so when with Income Tax at 40% and NI an additional 10% it would mean that half that working day belongs to the government? Add in commute time, plus fuel costs and I honestly let £10k (top line) of overtime go a year because I can't be arsed working it to see an additional £5k in my pocket, of which the government will see at least 30% in various duties and VAT.

It's a sad situation and one that won't change soon.

[nelly1]

tamore said:

why do people think that a 13 year humping of our economic system can be undone so quickly?

Because people are, by and large, morons.

A quick fix is where it's at, and most Labourites can't see further than the next handout paycheque, or indeed the end of their fking noses.

[0a]

BrewsterBear said:

0a said:

Regarding taxation, as well as transferring abroad people also work less and take less stressful lower paid jobs. I worked in a role that had a monthly bonus element and I can honestly say that seeing most of the incremental £1000-£2000 bonus go in tax/NI does not help incentivise you to work harder and longer. I have also left a role that was very well paid but unenjoyable as the extra £x you see in the salary on paper just wasn't worth it when it hit my bank account minus the tax/NI. Higher tax will always mean a higher take from a smaller base, it's about finding the acceptable trade off and in my opinion we are far too far in the direction of high tax right now particularly as you look at the top band.

Indeed. I earn circa £50k but could earn £60+k if I did some overtime. Where is my incentive to do so when with Income Tax at 40% and NI an additional 10% it would mean that half that working day belongs to the government? Add in commute time, plus fuel costs and I honestly let £10k (top line) of overtime go a year because I can't be arsed working it to see an additional £5k in my pocket, of which the government will see at least 30% in various duties and VAT.

It's a sad situation and one that won't change soon.

There is a failure to realise that every pound spent on "hard working" public sector represents time spent working hard for someone else to keep them in a job. The numbers you quote are almost identical to the situation I was in. I wonder how many others find the same and come to the same conclusion (mine was 1. Stop the overtime 2. Earn far more and pay less tax 3. Earn abroad. )

[Welshbeef]

JagLover said:

This graph says it all really



and in fact understates the extent of the problem by looking at a childless couple. Whereas the UK is fairly unique in the western world in not offering any tax allowance/child benefit to richer couples.

Thats not true at all/gives the wrong message.
Fact is in the UK you take home less but then pay less out for "services" as these have already been paid for by the tax system.

[Johnnytheboy]

0a said:

Because despite what the BBC, Labour and Guardian state, we are not cutting spending and won't be over the next few years. It has/will be going up in nominal terms and will be flat in real terms:

[url]



http://www.ukpublicspending.co.uk/downchart_ukgs.p...

Excuse my stupidity: what's the difference between those two graphs, i.e. from what are they derived and why do they look so different?

Does the one that keeps rising include interest paymenst and the other not?

[AJS-]

As I read those graphs, the top one is in nominal terms - the actual number of pounds spent at their value that year, whereas the second one is adjusted to reflect spending in terms of what a pound was worth in 2005.

Shows the problem quite nicely really, we've just spent ourselves poor.

The levelling off on the second graph seems fairly optimistic to me. Like waking up with a hangover and saying you'll never drink again, when you know secretly you'll be back in the bar by lunchtime.

[Welshbeef]

AJS- said:

As I read those graphs, the top one is in nominal terms - the actual number of pounds spent at their value that year, whereas the second one is adjusted to reflect spending in terms of what a pound was worth in 2005.

Shows the problem quite nicely really, we've just spent ourselves poor.

The levelling off on the second graph seems fairly optimistic to me. Like waking up with a hangover and saying you'll never drink again, when you know secretly you'll be back in the bar by lunchtime.

We can pretend it is New Years day and take a good month off money is tight noone goes out and need time to recover etc.

Unless your Greece in which case when you wake at 7am crack one open with the Kellogs.

[johnfm]

Welshbeef said:

JagLover said:

This graph says it all really



and in fact understates the extent of the problem by looking at a childless couple. Whereas the UK is fairly unique in the western world in not offering any tax allowance/child benefit to richer couples.

Thats not true at all/gives the wrong message.
Fact is in the UK you take home less but then pay less out for "services" as these have already been paid for by the tax system.

Wrong message?
It is a graph of 'take home pay'.

No doubt there are services to pay for in Hong Kong - but I bet you actually get some benefit, rather than seeing it disappear down the plughole of government largesse.