Posts tagged ‘uk plc debt’

That budget then

So, George Osborne has delivered this year’s budget – or, more accurately, confirmed the press leaks of the last few days. Quite frankly one wonders why he bothered standing up.

I think it is safe to skip rapidly over the growth forecasts provided by the OBR as the record of their gypsy fortune-tellers predictions is poor to say the least.

Equally, the less said about his wish for a balanced economy the better. Wishing for it is fine but I’d be happy if the government kept its paws out of the matter* as much as possible and left it up to the free market to sort out.

Borrowing

As he stated back in the Autumn, the government will continue to live beyond what it steals from the taxpayer past the end of this parliament (assuming it goes the distance). Indeed it doesn’t forecast a ‘balanced’ budget before 2017/18. In the mean time the National Debt is forecast to increase by £126bn (2012/13), £120bn, £98bn, £75bn, £52bn and £21bn (2016/17). That is a whopping £492bn – and all of which may, one day, have to be paid back.

I say one day because as we know the traditional way for government to deal with debt is to inflate it away and in 100 years time it is more than likely that that £492bn will be a lot closer to chump change than it is now. Gideon’s wheeze for delaying the inevitable for as long as possible is 100-year or perhaps even perpetual (i.e. non-repayable) gilts.**

Public Sector

Sadly there was no announcement of an immediate end of national pay bargaining. The Chancellor did though appear to thank the opposition for suggesting the end of national benefit rates – perhaps the only useful idea to emerge from Labour in a while. It would also make sense to make the NMW regionalised (assuming it is politically impossible at present to scrap it entirely).

Taxes

Let’s face it, the only thing anyone really cares about is how much the government is planning on stealing from them in direct taxation each year. The stupidity of it is how pathetically grateful we all get when we learn that it might not be as much as last year… without realising that they generally claw it back through indirect taxation instead.

The apparent good news for anyone earning less than £100k is that the government has decided it won’t start its thieving in the forthcoming tax year until you’ve earnt £8,105 – and next year is pushing that level up £9,205.

Obviously this is a good thing for anyone earning minimum wage sort of levels. Personally I think it would be better if no-one doing a 40hr week at NMW (which currently works out to £12,646.40) paid any tax but things seem to be moving in the right direction. The test will be what happens once the £10k level, as agreed at the start of the collation, is reached.

The likely option is that government of the day will starting treating it just like they do the the other tax thresholds and allow it to increase slower than wages, thus once again catching more people in the net.

What the Chancellor didn’t mention whilst he was crowing about the changes to the 0% band was that the £630 increase there is mirrored by pulling the 40% threshold down by £630, shrinking the 20% band by £1,260. This ensures that – for those under 65 – that the the 40% band still starts at anything over £42,475. This is the same tactic that the one-eyed Scottish idiot employed on a few occasions.

Together with the lack of change of the levels at which the tax free allowance is withdrawn and the highest rate of Income Tax is levied, the government is once again ensuring that, as wages rise, more people are dragged into the higher tax brackets.

Unlikely those of us who are earning to try to keep ourselves in drinking money, those who have reached pensionable age will find their 0% band frozen from 2013. If I am to guess, this is in order to equalise them with the rates for the under 65s in preparation for the merger of Income Tax and National Insurance – something which will also hit pensioners as they do not currently pay NI.

The positive sides of merging IT and NI should be
a) simplification of the tax code, and
b) give the population a better idea of what the basic rate of tax (excluding Employer’s NI) is.

With any luck, being told that the basic rate is actually over 30% (rather than the 20% they believe) may result in the sheeple demanding that it comes down…

For those on very high incomes, the semi-good news is that the highest rate of income tax is coming down. Not yet scrapped altogether (hopefully in a future budget) but being halved. Given the flagrant avoidance that took place before the 50% rate come into effect – and which will be duplicated now as people who can hold off until 2013 – this can only be a good thing. Will 45p in the pound (and the potential direction of travel) tempt those who haven’t yet upped sticks to stay though?

Excellent news for companies employees, shareholders and customers is that corporate tax is coming down even further with the aim of getting it to 22% from 2014. Not quite Ireland but better than France and Germany which may encourage those financial institutions who were thinking of leaving before a Tobin tax in introduced in those places. The increase in the bank levy may however put them off.

The so-called sin taxes generally slipped by without change to already announced increases except for the price a tobacco***. I imagine that the only people who were cheering this rise of inflation plus 5% (plus consultation on making tobacco-free cigarettes liable to excise duty) were the smugglers. As a non-smoker I would be open to the idea of bringing back duty-free smokes for people when re-entering the country…

Regulation

As trailed, Sunday trading laws are to be relaxed during the Olympics. Hopefully they will then be scrapped altogether as an anachronism.

Planning – perhaps the major reason for the cost of housing being so high – is being simplified. Supposedly the guidance is being cut to just 5% of its previous size although there is no word of whether part of this has been achieved by the use of single instead of double line spacing and a reduced font size.

We are also getting more ‘enterprise zones’. Why not just make the entire country one?

And Michael ‘Tarzan’ Heseltine is back. Has anyone checked him for knives?

Infrastructure

It would seem that the Government has finally realised that we do need more (or bigger) airports. Will Heathrow be getting that third runway after all? We might find out come the summer.

Annoyingly (but not surprisingly) the Government will continue to waste money on ‘green’ energy but in better news looks to be reversing the hit it gave the North Sea oil and gas industry last year.

Conclusion

One thing that this is not is a Libertarian budget. Government spending is still going up and Peter, let alone Paul, is being robbed to pay Peter.

To the laywoman (i.e. me) it appears to be yet another budget that just tinkers with things whilst fleecing the public for more money – a speciality which Gordon Brown perfected. There is however some future potential in it if some things (the IT and NI merger, national pay bargaining) do happen. To mis-quote that school report line no-one ever wanted to see: “could do a damn sight better”.

* Yeah, I know. Government leaving alone is wishful thinking, huh? Let’s just be thankful he isn’t attempting to plan the economy.

** It is ideas like this which make me glad that I’m never going to have children.

*** Ok, gambling as well as tax will be imposed at point of consumption in an effort to stop online gambling moving offshore.

1,000,000,000,000

Shortly after 1700 this afternoon the TPA’s debt counter rolled past the One Trillion mark. That’s one thousand billion pounds, ladies and gentleman, a one followed by a dozen zero’s or, for those who remember such things from school day maths, 1 x 10 to the 12th.

1,000,000,000,000.

That is how much UK Plc officially owes. Unofficial estimates – which include PFI costs and pension liabilities – put it at over 4 TIMES this. It is, by any count, a heady sum and one so vast that it becomes meaningless as we simply do not think in such numbers on a daily basis. Indeed, I am reminded of my dad talking about his work as an insurance underwriter in the oil and gas industry:

“We had to knock three zero’s off just to make the figures sound realistic.”

Let me then try to put the colossal figure into perspective.

  • It is over 81,074,069 times the wages of someone doing a 40 hour week at the minimum wage of £5.93/hour
  • It is over 38,610,038 times the average salary for a full time employee of £25,900
  • It is over 740,740 times the £1.35 million salary that Bob Diamond will earn as the CEO of Barclays once he takes over the job in March
  • It is over 833 times the £1.2 billion that Philip Green paid his family in 2005
  • It is over 166 times the £6 billion tax bill that certain individuals would have us believe Vodafone avoided
  • It is over 142 times the collective bonus pool of £7 billion expected to be paid to bank staff in 2011
  • It is over 7 times the approx £130 billion paid to RBS and HBOS in order to bail them out
  • It is 5 times the amount of money that we have created out of thin air in the last two years
  • It is almost 1.5 times what the government plans to spend in the year 2010/11

But, for those looking for some crumbs of comfort, it is only about 70% of our current GDP. On second thoughts it is not that comforting, is it?