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.

The Autumn Statement, as Mr Peston points out, has brought out some important differences between the two main parties in tackling our annual budget deficit = accumulating Nation Debt approaching £1,500,000,000,000 (£1.5 trillion) by 2015.

_Mr Balls who tells us that he will “make different choices” than the Conservatives from 2015, that will no doubt include more taxation (see further below) looks to ‘increase our borrowing to invest’, an old chestnut often mention by Mr Brown to justify running a £30-£40 billion annual overspend/deficit economy - after the UK balanced its books in the early 2000’s – while borrowing ‘off UK Plc balance sheet’ via the costly private sector contracted Private Finance Initiative e.g. for the NHS.

”The £50bn gap between Tories and Labour” - Robert Peston
www.bbc.co.uk/news/business-30339240

”The gap between the spending cuts or tax rises required by the Tories and Labour to hit their fiscal targets for the next parliament is a very significant £50bn.”

”How so?”

”Well the Tories are signed up to generating a surplus on the overall budget of £23bn in 2019-20.”

”And Labour is only committed to balancing the so-called "current" budget by then - that's day-to-day spending on public-sector wages, benefits, pensions and so on - while being prepared to finance capital investment with debt.”

”And since net public sector investment is forecast to be £27bn in 2019-20, a Labour government would require less austerity to the tune of £23bn plus £27bn - or £50bn.”

”They say the UK's creditors would probably be forgiving and tolerant of George Osborne borrowing more than he currently says he wishes to do, in that his record of reducing Whitehall spending by £35bn since taking office in 2010 has earned him his austerity proficiency badge.”

”But Ed Balls has never been chancellor, although he was the power behind Gordon Brown when he ran the Treasury and much of the country, both in the lean years from 1997 to 2000 and the big spending Labour years thereafter.”

”So Mr Balls has yet to prove, investors say, that he can shrink as well as grow the apparatus of the state.”

So Mr Balls as an advisor to Mr Brown coming up to the 1997 General Election and afterwards, had a major influence in Chancellor Brown’s thinking, including early tax raids in Labour’s first few years – VIA SIGNIFICANT POLICIES UK VOTERS WERE NOT TOLD ABOUT PRIOR TO THE GENERAL ELECTION.

UK government gold sales; the UK already with significantly less gold reserves than most other mature economies had never sold it’s gold in recent times, even when in severe financial difficulty, but Balls/Brown sold around 40% of our gold at a 20-year low price when advised/asked not to, WHY? We have never been told.

UK Home Stamp Duty; in 1997 once duty was due, it was due at a flat rate of 1%, before Balls/Brown hiked the rate to 3 - 4%, giving rise to the unfair ‘slab’ rate if going £1 over a tax threshold (just changed) and over the next decade or so, was to trap more and more home buyers into paying the higher rates.

UK Private Pensions/Companies Final Salary Pensions; with meagre annual rises in the State Pension during their whole term, UK private pensions then the best funded in Europe, were targeted by Balls/Brown, that helped decimate individuals saving for old age returns and Company Final Salary pensions.

Although ‘only’ £118 billion was taken via removing a tax incentive, on an actuarial/accrual basis, it cost peoples pensions savings closer to £250 billion over that period, which is why many workers are no longer offered company final salary schemes AND many savers saw the Labour writing on the wall, and BOUGHT PROPERTY/BTL rather than invest in a pension.

“Revealed: Labour's 'stealth raid' took £118BILLION off pensions, 'paving the way for the end of final salary schemes as they were suddenly unaffordable'”
www.dailymail.co.uk/news/article-2613609/Revealed-Labours-stealth-raid-took-118BILLION-pensions-paving-way-end-final-salary-schemes-suddenly-unaffordable.html

www.telegraph.co.uk/finance/personalfinance/pensions/10698432/Final-salary-pensions-10-times-more-common-in-public-sector.html

The conclusion has to be, that IF any political party after 2015 try to take the brake off of making cuts to government spending, while STILL saying that they will cut the budget deficit and will not increase government BORROWING – as night follows day, UK TAXES WILL BROADLY RISE FOR ALL – as various supposed taxes on the rich, will in £££ not even compensate for taking spending brakes off, never mind reduce our National Debt and ever higher interest charges.

And how can ANY political party that say they care about ‘the cost of living crisis’, via a fall in ‘real’ earnings since 2007, JUSTIFY broad tax rises to the electorate?

But politicians are tricksy, as in 1997, when Mr Balls/Brown PROMISED the markets and UK electorate they were not the old tax high, spend badly Labour Party, they adopted (then) Conservative budgets/spending to flatten the budget deficit in a few years and NOT to raise income tax – but deceptively conducted gold sales and large tax rises (mentioned above) straight away and many more after, during the GOOD times, rather than go on an unprecedented real terms spending spree.

The last paragraph from Mr Peston further above about Mr Balls is somewhat of an understatement, as we (and bond investors whose confidence decides our interest rates) shouldn’t have trusted his advice in GROWING our spending, never mind cutting it.

The above being proof if any were needed that any change of government is also a change in direction.
Who would travel if the captain kept changing the direction of travel.
You Brits need a coalition made up of a larger number of party's. This hopefully would smooth out any violent changes in direction

it could Aldo steer us around in circles.

Gfplux …… Re coalition governments in the UK ‘good for the direction of travel’, IMO you could not be more wrong – especially as the two main parties fundamentally disagree on the basics of the roles/needs of an overly large tax funded State and the Private Sector whose taxes support it – and the basic differences do not end there i.e. on taxation, savings, pensions and what we need from the EU.

So I have little interest going into great comparative detail re coalitions in Europe, where as far as I see in Germany they all broadly agree on a free market economy with strong fiscal/monetary controls AND Italy, that used to have general elections every other year, agrees on very little e.g. numerous urgent reforms, and as Budget Deficits aren’t allowed, they keep putting it all on the National Debt, to sort out another day.

Moreover in the UK, we have a ridiculous situation where the majority of the smaller parties are left wing/socialists, who hate each other because they erroneously think they are fundamentally different to each other but broadly agree on everything e.g. cutting the nations over spending cloth is called austerity NOT good house keeping.

While the very existence of the only small uber right wing party (who also thinks they are ‘different’), will ensure the UK will have ultra pro EU socialist administrations for many years to come.

“Ukip and the hard-Left are both blinded by Tory hatred”
www.telegraph.co.uk/news/politics/11252159/Ukip-and-the-hard-Left-are-both-blinded-by-Tory-hatred.html

In 2010; so do not let the UK co-operation of a right wing Conservative Party, with a (back then) arguably more left wing socialist Lib Dems than the outgoing Labour Party of 13-years, FORGED TOGETHER within a national economic/financial/business confidence/ jobs/housing/mortgage availability/nuclear energy/cost of living, crisis, working together so well, for the majority of one parliament.

As it was never easy, especially as the media and Labour were always looking to exploit perceived ideological and policy ‘rifts’ between the two.

In 2015; although out of immediate danger, albeit in a fragile economic world, there are KEY ISSUES for this parliament, that if we are indecisive, or get wrong, will have massive implications for us, our children and our children’s children.

• The EU; stay in or leave?

• English votes for English laws; where a devolved Scotland should no longer votes on English laws and the rest of the UK is not held to parliamentary ransom by Scotland always looking for ‘more’.

• Devolution of power to local authorities; how far do we go based on their uncanny ability to ‘find’ things to spend every penny offered, request more and enlarge themselves as ‘local employers of last resort’.

• UK economic policies; where destroying business confidence, would unwind recent growth.

• UK budget deficit policies; do we look to live within our means, understand tax cuts and market/wage forces undermining further reductions in the deficit will abate - or let future UK generations face the reforms, spending cuts and tax rises.

• Taxes; should more be raised from businesses and individuals to fund more government spending, notoriously inefficient and wasteful over long periods, so everyone is affected not just the wealthy.

• Energy; do we build/replace cheaper and more reliable nuclear energy to solve our shortfall or built far more expensive greener alternatives than we have, that will not give us energy security. And like the U.S. who’s fracking has made them energy self sufficient and soon an exporter, does the UK do the same and look to become energy sufficient, rather than rely on the likes of Russia to dictate supply/prices to Europe.

• Defence; do we just maintain what we currently have, or worry about the likes of Russia and a new ‘Cold War’. Do we go to great expense relocating military ‘stuff’ from Scotland to England on the ridiculous notion that if Russia ‘nuked’ Westminster and all UK military sites, Scotland would be safe from the fall-out.

And all those key policies are likely to be decided by a minority government/coalition with Labour, the Lib Dems, the SNP and Green Parties – all of whom have different views to the Conservatives on most of the above – and either sworn NOT TO SUPPORT A CONSERVATIVE GOVERNMENT, or were electorally wounded for doing so.
news.sky.com/story/1377174/uncomfortable-coalitions-or-chaos-ahead

But put simply, we may end up going back on our recent 'direction of travel' for many years to come, but do we want a UK’s future economy more like Germanys, or the far less competitive and unreformed France, or even Italy’s?

Hello isitmebut,
An interesting list of issues but probably not complete in the eyes of those who will disagree with your position.
However as we can not trust politicians to make the right decisions it does not matter what is on the list.

Gfplux …. I reiterate my earlier policy qualification on my list being “the KEY issues”, and while they may not be everyone’s MAIN concerns, my list of policies will determine major constitutional change and the UK’s governments ability both now and in the future, TO AFFORD the majority of any other policy – and by definition how much better off in their pockets the citizens will be.

Doing nothing on those issues, could be as bad as endless ‘tinkering’ and law making as political cowardice, rather than face a problem head on.

What we “CANNOT TRUST POLITICIANS” TO DO, is not stick to old ideological stands that have proven, in government (here and other countries), not only NOT to work, but create worst problems once a period of prosperity ends.

And on that note, the following article on the ‘Poll of Polls’ while showing the Conservatives and Labour on 31% each, confirms what I have been saying that due to unfair boundary lines and the UKIP vote – it ensures Labour WILL be the largest party in 2015, whether the SNP gives Miliband a drubbing or not.

”Traditional model of politics 'cracking apart' as hung parliament looms again”
www.independent.co.uk/news/uk/politics/traditional-model-of-politics-cracking-apart-as-hung-parliament-looms-again-9913592.html

” It shows the two biggest parties neck and neck on 31 per cent, with Labour down two points over the past month. But the Tories are not boosting their standing and are unchanged on the previous month.”

“The traditional mould of British politics appears to be cracking apart before our eyes,” said John Curtice, Professor of Politics at Strathclyde University, who compiled the poll of polls.”

“As a result, Britain seems to be on course for a hung parliament that could prove very difficult to managed indeed.”

“On a uniform swing, Labour would win 311 seats, 15 short of an overall majority; the Tories 278; the Lib Dems 29 and others 32.”

“But if the SNP matched its current poll ratings in Scotland, Labour could see its number of MPs cut to 290 and be 36 short of a majority.”

And based on the likely 2015 Coalition, compared to NOW, over that parliament the UK is likely to; tax & spend MORE, business confidence/investment plummeting, interest rates rising more than would have, increases the accumulating UK National Debt from £1,500,000,000,000 for our grandchildren to face, remain in an EU moving closer to a Federal State, see Scotland ‘pillage’ the rest of the UK, be less energy secure with 3rd world shared power cuts (brown outs) and go back to our troops being sent into war zones WITHOUT the right equipment – with the UK in no financial position to solve many other UK social issues.