Autumn Statement on the UK deficit, tax & spending.

[Isitmebut]

*Probably Osborne’s last Autumn Statement, it may be worth remembering what the Coalition inherited;

• The UK economy boosted by the growth from City/financial/debt excesses, but still running an annual budget deficit during a boom INTO the 2007/8 crash, then LOST over 7% of output/GDP as our economy relied on the financial sector, more than other countries.

• Hundreds of thousands of Private Sector jobs were lost as unemployment rose significantly, while government Public Sector spending and jobs increased, providing unsustainable GDP growth and according to the Centre for Policy Studies, we were ALREADY IN A COST OF LIVING CRISIS, as from 2007-2010 inflation grew by 10% and wages grew by 5.8%.

• UK manufacturing had been nearly halved from 1997, the economy was therefore unbalanced, there had been no government attempt to ‘cut the UK cloth’ to the economic conditions by way of an overdue Public Spending Round to review ministerial spending, or deficit reduction (that Darling was forecasting to hit £167 billion that year) – and the only ideas at the time to help private sector companies and our personal finances, was to TAX OUR WAY TO GROWTH.

www.telegraph.co.uk/news/politics/labour/7539343/Labours-planned-National-Insurance-increase-will-cost-jobs-Alistair-Darling-admits.html

• Finally the UK needed huge infrastructure spending neglected through a time of high tax revenues; several new Nuclear Power stations with the lights forecasted to go out by 2014 onward, a million or more new homes, roads, trains and apparently flood defences.

Clearly Osborne has missed some deficit etc targets, but very little had been done from late 2007 onwards through the largest financial/economic recession is over 80-years, to put together a joined-up-policies plan to;

Cut unsustainable government spending (especially 13-years of waste/fat), reduce the budget deficit, boost the Private Sector paying for government spending by helping companies/job creation, cut unemployment (especially 16-24 year olds), help the cost of living crisis by REDUCING personal taxes, build new homes that fell to decades long lows (DESPITE an open door immigration policy), and other large infrastructure projects to ENSURE FUTURE growth.

Finally as long as we HAVE a big picture plan, the markets will continue funding our national debt at relatively low levels to the rest of the world - but come 2015, there will be huge political risks within the UK, due to uncertain coalitions and future economic co-operation.

Re the 'cost of living crisis' experienced in any major recession, in any country, I'm still waiting to see a magic bullet from any party to fix it, including freezing energy prices, which as energy commodity prices should continue FALLING, there is a strong possibility this policy would have locked consumers into higher quarterly bills for a year or two.

Trying to make promises ignoring market forces, especially those in an industry where it is crucial for energy companies to fund the UK’s future energy infrastructure needs e.g. nuclear power staions, BEFORE our lights go off, is never advisable – especially for our last Labour Energy Minister, a certain Mr E. Miliband.

What governments can do to limit the damage of a recession on peoples wage is to reduce the taxes paid by working people’s salaries, not keep putting them up from 1997 and looking at just National Insurance (see link in OP), that was their plan from 2010
www.dailymail.co.uk/news/article-389284/The-80-tax-rises-Labour.html

In conclusion, apart from the minimum wage, set by an independent panel, governments can NOT control what every person is paid by private sector companies, all they can do is create the environment, confidence and tax structure to CREATE jobs, and then market forces boosts wages as the employee market tightens as the economy continues to grow.

If other political parties have not grasped that economics 101, they shouldn’t even be standing for parliament, never mind running the countries finances.

Re todays Home Stamp Tax reforms to make it fairer when home buying prices go over tax due thresholds, it may be work remembering that back in 1997, it was basically a 1% Flat Rate until Labour got hold of it.

Fantastic news about the stamp duty. Daughter due to exchange on her house next week and she will save over £4,000 on stamp duty with this new announcement.

In conclusion, apart from the minimum wage, set by an independent panel, governments can NOT control what every person is paid by private sector companies, all they can do is create the environment, confidence and tax structure to CREATE jobs, and then market forces boosts wages as the employee market tightens as the economy continues to grow.

Trickle down economics.

Worked well in the past, but not in these greedy times when wealth creators are not prepared to share their profit with those that created it for them and prefer to rely on the Govt to top up poverty wages to a living level with benefits.

6.50 per hour is an obscenely low amount to pay an adult. On those wages a person will never be able to afford their own home and will probably always need some Government assistance in the form of Housing Benefit.

Alas dear WetAugust, there is no god given right to jobs creation, just ask the rest of Europe.

Maybe like others, you are of the opinion that the top FTSE 100 or 250 companies are the main employers in this country, they are not, the small the medium sized companies are by far, so the Minimum Wage is independently set by a panel on what is affordable.

www.gov.uk/government/news/one-million-set-to-benefit-from-national-minimum-wage-rise-to-650
“The government has approved a rise in the National Minimum Wage to £6.50 per hour later this year (2014), with more than 1 million people set to see their pay rise by as much as £355 a year.”^

“The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.”

“The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.”

How many tens of thousands High Street shops closed since 2008, and how many more would have gone if the MW was higher?

Osborne tried to 'talk it up', but got a slap.

(Feb 1 2014) “Osborne taken to task on call for £7 minimum wage”
www.ft.com/cms/s/0/ebd8aba8-8c1b-11e3-bcf2-00144feab7de.html#axzz32a4m4eoz

“George Osborne was wrong to raise hopes that the national minimum wage could be restored to its pre-recession value of £7 per hour before the election, business department insiders have warned.”

“There is “no way” the Low Pay Commission, which sets the minimum wage, would sanction such a steep rise this side of the election, said one Department for Business, Innovation and Skills insider. “We have no idea how they got to the £7 figure,” said another. “We are baffled.”

You're always lecturing and hectoring Isitmebut, but it's all based on propaganda.

I prefer to look around me at what's actually going on.

The 'independent' panel that sets the NMW isnt really independent, as it takes advice, projections and forecasts from the Govt into account when setting the figure. Plenty of scope there for the Govt to skew the facts.

There was a time, within my working lifetime, when wages did not have to be topped up to a liveable level.

These people on minimum wage are just slaves. They can never aspire to the non essential things that make life (and working) worth living.

They are just existing.

WetAugust .... 'there was a time' when the UK and the rest of the West didn't lose millions of manufacturing jobs to Japan, Taiwan, China and emerging nations yet to emerge.

There 'was a time' when the UK built enough homes, prices didn't treble over a decade affect mortgage/rent discretionary income.

There 'was a time' Council Tax didn't go up over 110% in over a decade and yet people bitched, nay marched over a fairer Poll Tax.

There 'was a time' paying the government a tax for the right to buy a medium to large family home didn't go up 300 to 500% in that same era.

There was a time our low to medium skilled didn't suffer 'wage 'compression' due to importing a new workforce.

There was a time UK private/company final salary pensions were plentiful and the best funded in Europe.

There was a time UK Productivity was much higher ensuring higher wages were affordable.

God, there was even a time my arse was so pert I could have cracked a walnut between my bum-cheeks - BUT THINGS CHANGED, much of it during 13-years of the worst economic management since heaven knows when.

I heard Balls todays, possibly on Sky, saying that he was to tax something or other and bring in a 10p rate of income tax for the poor.

Didn't Labour drop the 10p income tax rate after the crash started, and budgeted to put up the tax on jobs and fuel duty (Osborne cancelled in first budgets) as their solution to the 'cost of living crisis' started on their watch?

Not that long ago Labour were playing with yet another raid on private pensions, death taxes and the raising of the National Insurance jobs tax to put into the NHS.

All their time is spent looking to tax something, some company, some savings, never definitive ways to grow the economy to pay for 'stuff' - so we get the classic high spending, high taxation, pan-holing private sector that pays all the bills, so due to the enormity of the financing gap, higher taxes over time FOR EVERYONE.

Yet Balls has the stones to say the country is worse off under the Conservative led coalition than we would have been under Labour? Joker.

The UK and the rest of Europe is entering a very low inflation, difficult growth, so low wage growth environment to last for years - so low taxes and smart government/spending will be the key to our success now and future prosperity.

'Back in the day' high inflation and similar rises pay rises to compensate, 'eroded' personal and government debt/deficits, as what seemed painful to fund today, was far easier around 3 years later, after several % rises in salary/income/tax receipts eased the pressure.

As Japan found after their financial/asset price crash in the early 1980's, that became an economic recession to the people, with a Base Rate of 0.1% and mild DEFLATION, they initially called it 'the lost decade' - but the effects were still affecting incomes etc for well over 20-years.

My point is, the UK (and Europe) in a low Productivity economy, with well below 2% target inflation, will find low wage growth even above inflation will not be enough to make the majority of us feel richer, or erode our personal and government debt quick enough similar to historic patterns.

So while we don't know how long it will take to break the low salary rises Japanese style cycle, we HAVE TO HAVE ANNUAL ECONOMIC GROWTH AROUND 3% to at least pay our way and start to reduce our deficits through growth jobs & taxes - as with our annual deficit, we cannot afford EU style 2nd & 3rd post crash recession slumps.

Will it be better in Australia than it will be here in the UK?

{knows nothing}

Hi there Timely ….. to be honest, I don’t follow the Australian economy at all, but generally speaking Australia is in far better shape than we are, but as the links below show, Australia is in for a tougher time, as their economy is heavily linked to commodity prices, as global commodity markets are generally weakening, as we find with oil.

www.bbc.co.uk/news/business-30304828

www.bbc.co.uk/news/world-australia-30221692

Australia as most economies unaffected by the mainly Anglo-Saxon and European financial crash, morphing into deep economic recessions, did not need huge deficit spending to help them get out of any slump they had.

Indeed I believe Australia was running annual budget surpluses going into the financial crash, which did go into minor deficits after, whereas the UK recklessly was running £30-£40 billion annual deficits in the years before the financial crash hit – and as our tax receipts/increased government spending were so dependent on the City tax receipts and a bank lending boom, we ended up in nominal terms with the WORST annual deficit in Europe.

As most countries figures are expressed in a percentage of GDP (which I personally challenge, as you can get ‘the wrong type of GDP’) I can’t currently tell you in figures what the Australian overspend has been.

But in total it will be nothing compared to our nominal £90-£100 billion by 2015, which as an EU comparison, compared to France, who has done little to reduce theirs since the crash, ours is probably still more than DOUBLE theirs, after all our cuts to date.

The Australian back of a fag packet conclusion, based on an economy that had already raised its Base Rate I believe up to 2.5%, is they are in for possible tax and rate rises, but they probably can do more to compensate for the fall in commodities via other sectors (rebalancing their economy as commodities trade in decade long up/down trending cycles) - so relatively speaking, I’d rather be there than here in soooo many ways. lol

It is very sad that Politicians are afraid to speak plainly and tell the truth. It is their DNA as they want to get re-elected and need short term fixes. When they try some long term planning they don't get the votes.

IsItMe thank you so much. Do you think the UK IS heading back to the days of The Road to Wigan Pier then?

1930s style poverty?

Timelynamechangey …. The short answer (for non insomniacs) is a definite NO, but it really depends on what country economic model we follow from here – but lets have a quick look at why people are even talking about that after the Autumn Statement.

Governments, the Bank of England, or even to a less detailed extent, companies, HAVE TO MAKE ALL SORTS OF PROJECTIONS several years out when formulating spending and other policies/plans in the NOW. But when doing so, they have to use a ‘model’ that basically takes into account the policies/plans and all sorts of global, macro. micro, economic ASSUMPTIONS now, that could significantly change over the future.

A quick example is that in 2010, who forecast our largest trading partner (the EU) would be teetering on their 3rd recession since 2007/8, while we had just the one?

Who forecast the record rebound in UK job growth we have seen, certainly not the BoE who had indicated as we fell to 6% unemployment they would put the Base Rate UP, yet now on that with unemployment forecasts expected to fall to around 5.5%, the current weak global economy, and fiscally tight UK conditions – the prospects for higher UK interest rates looks ever more distant in the future.

BUT the government forecasting based on current economic data and future ‘known knowns and known unknowns’ has to be done by a responsible government, so that they are aware of what could happen when formulating policies now and budgeting for the future years, IF ALL THEIR CURRENT FORECASTS ON GDP, INFLATION, INTEREST RATES, CURRENCY, BUSINESS INVESTMENT/GROWTH, EMPLOYMENT,TAX RECEIPTS ETC ETC ARE ALL CORRECT, for several years ahead.

The government independent OBR set up by Osborne, as do similar independent forecasters, use THEIR ECONOMIC MODELS, to crunch their numbers, and while the joke is you could put 10 economists in a room and get 15 opinions, we do have to take serious note of the better ones, to keep government ‘honest’, especially at election times.

BUT GOVERNMENTS/CHANCELLORS HAVE TO WORRY ABOUT THE NOW, the state of the State, and Osbourne inherited a budget deficit projected to hit £167 billion that year by Labour, financed by government bond issuance/debt - but still had to ensure the UK brought back confidence to businesses, their new investment, that brought back employment lost and created new jobs and tax receipts from both, while trying to help those with their incomes falling (currently in ‘real’ terms), as happens in all great recessions.

In conclusion; if the non competitive, largest real increase in government spending in Europe UK’s ‘country model’ up to 2010, that was similar to France, but we had a significantly greater exposure to the financial crash and the SPENDING based on the tax receipts they brought in HAD KEPT GOING, we would have been in big trouble by now.

Unemployment would not have fallen (thanks to Osborne reforms) the size of the State with all its waste/inefficiencies would have risen, the annual budget deficit would have gone HIGHER and we’d be paying more ANNUAL interest on the National Debt than the current £52 billion.

The economic building blocks and availability of finance to ensure we DO NOT GO BACK TO THE 1930’s ARE MAINLY NOW IN PLACE, and therefore we have the best chance in Europe and elsewhere, to take advantage of any global growth - as if we REMAIN a low tax, business friendly country, with better skilled school leavers joining our skilled workforce, more jobs will be created and pay rates will soon increase well over the rate of inflation.

But as those CURRENT PROJECTIONS/ASSUMPTIONS will be relevant to WHOEVER takes over in 2015, from 2015 any tax rises, anti business, anti private sector jobs, increases in the size of the State policies - will REVERSE all the positives and growth from the previous 5-years – and put us on track to the 1930’s, with the rest of Europe, where some major economies drastically still need more labour, business, and deficit policy reforms.

You'll all be pleased to know that a Bill is likely to pass through the Commons this afternoon that will endure that the UK continues to give .07 of the country,s GDP away each year, to other countries

So we will now be borrowing money, and the UK tax payers will be paying interest on that borrowed money so we can send money go countries like India, which has it's own space programme , or Argentina, when we are also protecting the Falkalnds against Argentina, to South Africa, so they can build a new presidential palace, and to numerous other countries where corrupt regimes will ensure it enriches the elite, not the people.

But hey, we should feel good about it because we can polish our liberal haloes with pride.

Oops sorry. I meant 0.7% of GDP

Makes you feel even more worthy

Every country pledges a percentage of aid money, few give it, the problem is we appear to give it to the likes of the World Bank to distribute, rather than hand it over to those most deserving the most - so best those supranational pen pushers, do a better job.

Still UKIP full of ex/failed Conservative backers, leaders and back benchers who couldn't get their own way only has to worry about 0.7% of our GDP, and offer more tax giveaways than anyone else.

Thankfully the real Conservatives are looking after the the other 99.3% of GDP.

Thanks timely for that last post.
Budgeting and forecasting should be understood by everyone. Frankly should be taught at a very early age in school.
Every day we are making our own budgets and forecasting. Should I buy this or not etc. A number of us are not very good at it or lack the discipline as can been seen from people who are in debt. Worse still are those in debt who can not service the debt.
However my beef is with the politician who just can not tell the truth. If I tell my partner My net salary is £1000 they would expect that to be the truth. Frankly if a politician tells me something how can I believe it. It will have the basis of truth but will have a spin on it that will make it unrecognisable from the truth.
Frankly democracy is close to broken.

Gfplux …. good political posts/point, if memory serves, back in 2010 when Darling was trying to come clean from the Brown ‘deficit, what deficit?’, and the Conservative told people there would be tough times ahead – the Conservative Poll lead fell markedly.

Just think, if in 2010 the Labour government nearly 3-years into the crash had set budgets for a few years ahead, told us what they were going to do to boost private sector jobs, beating a ‘cost of living crisis’ that in real terms started in 2007, cut government spending, build more homes, reduce the budget deficit etc AND TOLD ALL OPPOSITION PARTIES TO DO THE SAME – there would have been no surprises ‘the people’ could judge in 2010 who had the best definitive plan, and PMQT wouldn’t have been an ‘oppose everything’ bun fight for the first 4-years.

In 2015, there is no excuse for any political party, with no UK financial hidden surprises as in 2010, with the current UK’s finances and the OBR forecasts based on the NOW, not to outline any new taxes etc within the first year or two within their 2015 General Election manifestos.

The current and numerous economic model projections/assumptions have ‘spat out’ that the size of the UK State will be massively shrunk in several years time, but clearly if we see similar POSITIVE surprises from 2010 projections/assumptions IN THE YEARS AHEAD (which I’d guess is what an informed Osborne is quietly confident about with current Conservative type policies in place), the new figures BASED ON BETTER GROWTH will show far more money available to spend on the State etc.

That is what annual Budgets are for, ‘tweaking’ taxes/spending to meet your planned direction of travel; the Conservative lowered taxes significantly for all from 1979 to 1997, but they never fell in a straight line as 'stuff' happened, but did so with joined-up-policy-planning during their whole administration.

The UK OBR is there to tell the people the true story, if politicians are not forthcoming, it is up to the media to ask the right questions to ALL the political parties coming up to election time rather than rely on soundbite Leadership Debates with 1 minute answers, so democracy CAN have a chance to work. IMO.

Gfplux

One of the most honest statements was after the last general election when Labour MP Liam Byrne left a note in the Treasury telling the incoming Conservatives "There's no money left"

We don't hear much about Liam Byrne these days

Wet said "There was a time, within my working lifetime, when wages did not have to be topped up to a liveable level. "
I remember it. It was when we did NOT have a minimum wage at all . It is called free market economics and it works well and protects workers.

Instead nowadays the state supports large employers by giving tax credits and housing benefits to people in work and imposing a minimum wage. We all knew no good would come of any of that and it has not.

But if the minimum wage was abolished there would be a race to the bottom and habitually resident workers would be undercut by EU immigrant workforce?

Or perhaps scrapping min wage would actually increase wages?

I just find the current low interest rate, low wage, soaring house price and rent era very concerning. The Govt cannot go on subsidising the workforce at present levels

A UK Base Rate at a 300-year all time and low and outstanding QE prior to when the coalition came here, is still in place for a solid reason, and independent central banks take a governments fiscal position (loose or tight) into account when setting their inflation rate mandate Base rates - so likely to remain lower under a 'hair shirt' Conservative government for some time.

House price rises and associated costs, again has roots in the previous decade (as the 2004 Barker Report warned), but more council homes were built in the coalitions first 4-years, than 13-years under Labour who saw the net number fall significantly - and more private homes are now being built, due to coalition policies to help buyers that also helped home builder confidence. That might end in 2015 as massive political risks will join the economic risks, here and abroad.

Low wages, no government dictate can change that, but continuing coalition pro business, pro employment policies will continue to see the unemployment rate fall into 2015, but as per above, that could change on political/economic uncertainty.

Lower taxes and an economy normalizing boosting pay rates could continue to unwind years of tax 'tinkering', when forests were felled to produce Brown Budget Reports and resulting accountants Tax Guides explaining it all - thereby streamlining income and other taxes

In the past I was very intellectually politically engaged in the UK.
I no longer live their as I am now resident in another EU country. This and the fact I am now old has lent a lot of distance to my views.
British democracy with two main party's meant that when the Government changed so did the direction. Today's there is a coalition but still moving in a direction that would be changed if the present opposition gained power.
For me this is the part of Democracy that I see broken.
Some European country's have had coalitions for decades that are much more complex and mixed in their make up and for some this has meant much of the things people care about working well.
People care about Jobs, education, healthcare and infrastructure.
There will always be cases that disprove the rule.
I am not trying to build a complex and watertight case but just offering some thoughts.
Thanks.

Sorry, there not their. It's my age, forgive me.