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Main £ Numbers From Spending Review

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Osborne's numbers:

In the next 4 years Government's total current spending will be:

2011-12: £651 bn

2012-13: £665 bn

2013-14: £679 bn

2014-15: £693 bn

Yes, it will grow, at least in cash terms (these numbers are not adjusted by forecast inflation.)

And I think the numbers above do not include interest on the current government's debt.

__________________________________________________

On the cost of the government's debt:

Britain's is currently spending on servicing the current government debt:

(That is interest alone)

£120m per day, or

£43bn per year

And debt interest will grow to £63bn by 2014-15.

.

Edited by Tired of Waiting

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Osborne's numbers:

In the next 4 years Government's total current spending will be:

2011-12: £651 bn

2012-13: £665 bn

2013-14: £679 bn

2014-15: £693 bn

Yes, it will grow, at least in cash terms (these numbers are not adjusted by forecast inflation.)

.

Those are about 2.1% increases each year.

Depending on whether you think there's real inflation or not - they are cuts in real terms.

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They must be expecting some inflation then. I guess they don't have to worry too much about the interest payments, the BoE will be holding all the debt, because that's the only way we are getting inflation.

It could be. I'll have to think about all these numbers for a day or 2.

But I think you are right. Both the government and the BoE have been consistently saying that if needed the Bank will step in loosing monetary policy to compensate for the fiscal tightening.

BUT that was NOT such a hard fiscal tightening, unless we do have some inflation, as you say, and despite it the government keeps those cash numbers.

It is becoming messy. Moving targets and shifting sand everywhere.

One thing is clear: they want SOME inflation. But how much?? 3%? 5%?!

And will they be able to implement their plans?

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Osborne's numbers:

In the next 4 years Government's total current spending will be:

2011-12: £651 bn

2012-13: £665 bn

2013-14: £679 bn

2014-15: £693 bn

Yes, it will grow, at least in cash terms (these numbers are not adjusted by forecast inflation.)

And I think the numbers above do not include interest on the current government's debt.

__________________________________________________

On the cost of the government's debt:

Britain's is currently spending on servicing the current government debt:

(That is interest alone)

£120m per day, or

£43bn per year

And debt interest will grow to £63bn by 2014-15.

.

I expect that as unemployment rises substantially more money will have to be cut from other spending to pay for this.

This is roughly what happened under Thatcher.

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Those are about 2.1% increases each year.

Depending on whether you think there's real inflation or not - they are cuts in real terms.

Yes if they keep inflation on the BoE target of 2%, then that budget is virtually constant in real terms.

If inflation is above 2%, then it will be a cut in real terms, and

if inflation is below 2%, then it will be an increase in real terms.

But all these numbers are tiny when compared with an annual deficit of more than 10% of GDP, or around a quarter of total government spending.

I don't get it. I don't understand why the bonds market is "rock solid", as a trader just said on the BBC. :huh:

----------------------------

OK, let's do some math: They want to reduce the deficit from to 3% of GDP. I think it is around 11% now. That is a 8% reduction in 4 years, or 2% per year.

If GDP...

I think I got it. There is one possibility: Some government revenues are not exactly directly proportionate to GDP. Admittedly VAT and income tax do go with GDP, but Corporate Tax varies much more wildly than that, as it is not a tax on companies' revenues, but on companies' profits. Perhaps the government is expecting a strong revenues growth?

Edited by Tired of Waiting

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Yes if they keep inflation on the BoE target of 2%, then that budget is virtually constant in real terms.

If inflation is above 2%, then it will be a cut in real terms, and

if inflation is below 2%, then it will be an increase in real terms.

But all these numbers are tiny when compared with an annual deficit of more than 10% of GDP, or around a quarter of total government spending.

I don't get it. I don't understand why the bonds market is "rock solid", as a trader just said on the BBC. :huh:

----------------------------

OK, let's do some math: They want to reduce the deficit from to 3% of GDP. I think it is around 11% now. That is a 8% reduction in 4 years, or 2% per year.

If GDP...

I think I got it. There is one possibility: Some government revenues are not exactly directly proportionate to GDP. Admittedly VAT and income tax do go with GDP, but Corporate Tax varies much more wildly than that, as it is not a tax on companies' revenues, but on companies' profits. Perhaps the government is expecting a strong revenues growth?

Indeed, looks to me like p1ssing in the wind. Inflation at 3-5% or not, what real difference are these spending cust going to make to this:

http://www.debtbombshell.com/

Hold the gold my friends, this ain't over by a long stretch.

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I don't get it. I don't understand why the bonds market is "rock solid", as a trader just said on the BBC. :huh:

I wonder that also, maybe we are one of the most shiny turds?

With all this bond business its the flavour of the month/bubble I just get this feeling its all lovely until.....its not and all these plans will go out the window.

Maybe this moment will be when a country does default and shows us that it can happen.

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Indeed, looks to me like p1ssing in the wind. Inflation at 3-5% or not, what real difference are these spending cust going to make to this:

http://www.debtbombshell.com/

Hold the gold my friends, this ain't over by a long stretch.

The picture gets even more complicated when we consider also the private sector indebtedness (companies and households), which are each about as big as the government's debt.

This does have an effect on growth, as consumers wont consume as much as before.

That is why the only way out will have to be an "export led" recovery. And for that sterling will have to win this "currency" war, and go down deeper than the others. This must be inflation.

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The picture gets even more complicated when we consider also the private sector indebtedness (companies and households), which are each about as big as the government's debt.

This does have an effect on growth, as consumers wont consume as much as before.

That is why the only way out will have to be an "export led" recovery. And for that sterling will have to win this "currency" war, and go down deeper than the others. This must be inflation.

Indeed. Sterling looks a shaky prospect from every angle. The so-called 'cuts' have done nothing to change that.

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I expect that as unemployment rises substantially more money will have to be cut from other spending to pay for this.

This is roughly what happened under Thatcher.

I don't think unemployment will necessarily rise. It may stay about stable. With interest rates this low the private sector is currently creating some jobs, and this should continue. It could be enough to offset the public sector job losses. But it is difficult to image a big rise, that would increase total employment rate by much.

15757370.jpg

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Those are about 2.1% increases each year.

Depending on whether you think there's real inflation or not - they are cuts in real terms.

http://university.unitedstatesliberty.org/654/textbooks/adam-fergusson-when-money-dies-nightmare-of-the-weimar-collapse/

The unsatisfactory conditions of internal commerce had their effect in persuading the Exchequer that an unbalanced budget had to be accepted. Revenue from taxation, export duties and customs dues in the last nine months of 1922 amounted to 324 milliard marks, or about £10 million at the current rate of exchange. Government expenditure over the same period, on the other hand, had come to 1,173 milliard marks, or about £40 million. The deficit had been made up by increasing the floating debt with note issues amounting to nearly 850 milliards. The very low levels in real terms of both expenditure and revenue showed how much the finances of a highly-industrialised nation of more than 60 million people had gone to pieces. Inside the country at Christmas time the mark was worth one-1,723rd of its pre-war value: outside the country it was worth only one-1,92 3rd.

In that unhealthy picture the government can have seen only two relatively bright patches. One was that the country’s internal debt, to the distress of the stockholders, had dwindled to nothing. The other was the almost total absence of unemployment; but workless-ness, of course, had been the Socialist government’s greatest fear ever since the Army had started to disband, and that fear had been in large measure behind the inflationary policy.

.........

As the circulation swelled and the value of the mark fell, less and less importance attached to revenue from taxation. The increase in the floating debt recorded on June 27 — the 1,500 milliards which had so startled Addison — was more than the Exchequer’s total revenue (1,400 milliards) for the entire month of May. Although the Finance Ministry was working on plans to bring taxes up to a level proportionate to the mark’s depreciation, the Reichsbank’s policy of discounting and printing was bound to keep the mark far ahead of the game. In two and a half months-government expenditure had totalled the equivalent of £15.5 million against a revenue of only £5 million. In sterling terms these sums were trifling enough: but the truth was that a nation of 60 million people was going bankrupt because (at, say, 500,000 marks to the pound) she could not raise even £30 million a year to meet expenditure of only £80 million.

Towards the end of June 1923, the government began turning with repeated, but undue, optimism to temporary expedients of all kinds. One nostrum was the multiplier, to be wielded by the Minister of Finance as he thought fit, to keep the rate of taxation on a par with that of depreciation. It worried no one in the ministry that it sinned deeply against Adam Smith’s sacred canon of certainty which provides that taxpayers know clearly in advance what they have to pay. During May, income tax had been multiplied 25 times, and it was now announced that in August, when payment would be due, the multiplier would be 40. Yet it was obvious that the tax returns could never keep up with the speed of depreciation, from whatever source they came. The yield from consumption duties — for example, on tobacco, beer, wine, sugar, salt and playing cards — no longer even met the cost of their administration.

Yep inflation doesn't matter, as long as it go up tax receipts will match spending.

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I wonder that also, maybe we are one of the most shiny turds?

With all this bond business its the flavour of the month/bubble I just get this feeling its all lovely until.....its not and all these plans will go out the window.

And with the BoE buying bonds, and the main UK banks under gov. control, and the Tories connections with the City, perhaps it is possible that this "rock solid" reaction from the bonds market has been "arranged"?

I am not very familiar with trading practices, but I guess if you have a group with deep enough pockets you can set up buy and sell orders around a band, and keep the thing inside it.

Maybe this moment will be when a country does default and shows us that it can happen.

Argentina, Brazil, etc. It happens. Actually Britain went to the IMF in the 70s.

.

Edited by Tired of Waiting

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Has the Treasury published the other sets of figures to go along with the spending ones.

I'm interested to know what the hell they think the tax take is going to be over the coming years.

What would be useful is projected tax revenues for the past 10 years alongside actual tax revenues, I'm guessing the projections have been very wrong and the tax projections for 2011 onwards will be making some very generous assumptions about what will happen.

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It could be. I'll have to think about all these numbers for a day or 2.

But I think you are right. Both the government and the BoE have been consistently saying that if needed the Bank will step in loosing monetary policy to compensate for the fiscal tightening.

BUT that was NOT such a hard fiscal tightening, unless we do have some inflation, as you say, and despite it the government keeps those cash numbers.

It is becoming messy. Moving targets and shifting sand everywhere.

One thing is clear: they want SOME inflation. But how much?? 3%? 5%?!

And will they be able to implement their plans?

I've always said on here that the government want inflation to run at mid-high single figures for 5 years or so. Compound say 5% over five years and you reduce the debt burden substantially. In their minds they expect interest rates to remain low, the odd bout of QE and for savers out there suck it up or spend it.

I don't know if they can achieve this 'soft' landing as past history would suggest it doesn't take a long time (24 hours) for a situation to spiral out of control (not that they really had control of anything in the first place).

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Has the Treasury published the other sets of figures to go along with the spending ones.

I'm interested to know what the hell they think the tax take is going to be over the coming years.

What would be useful is projected tax revenues for the past 10 years alongside actual tax revenues, I'm guessing the projections have been very wrong and the tax projections for 2011 onwards will be making some very generous assumptions about what will happen.

Exactly. They must be projecting tax takings raising by much more than GDP. (That is what I meant, or tried to say in a previous post.)

Good point though, these projections are public, I think, from the new Office for Budget Responsibility. It must be there, somewhere.

Edit: http://budgetresponsibility.independent.gov.uk/

Edited by Tired of Waiting

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I don't think unemployment will necessarily rise. It may stay about stable. With interest rates this low the private sector is currently creating some jobs, and this should continue. It could be enough to offset the public sector job losses. But it is difficult to image a big rise, that would increase total employment rate by much.

15757370.jpg

I don't see much evidence of genuine private sector jobs being created sure Gordon spunked a load of money up against the wall recently and a lot of it went to the private sector (connaught to name but one of many so-called private sector employers) but that is ending (connaught again).

Half a million public sector jobs to go?

The plateu you see is just the election cycle.

Edited by gravity always wins

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I've always said on here that the government want inflation to run at mid-high single figures for 5 years or so. Compound say 5% over five years and you reduce the debt burden substantially. In their minds they expect interest rates to remain low, the odd bout of QE and for savers out there suck it up or spend it.

I don't know if they can achieve this 'soft' landing as past history would suggest it doesn't take a long time (24 hours) for a situation to spiral out of control (not that they really had control of anything in the first place).

Yes, I agree. Once inflation starts to climb they will BE FORCED to raise interest rates, they would HAVE TO, no choice, otherwise inflation WOULD spiral out of control. If inflation stays near or above 5% for more than... I am not sure, say, 6 months? then they would HAVE to raise rates. It wouldn't work. I think they can use some inflation, but probably less than 4%/year.

I guess the answer is that they are expecting that tax revenues will recover, perhaps from Corporation Tax, as companies have some profits.

.

Edited by Tired of Waiting

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......

I think I got it. There is one possibility: Some government revenues are not exactly directly proportionate to GDP. Admittedly VAT and income tax do go with GDP, but Corporate Tax varies much more wildly than that, as it is not a tax on companies' revenues, but on companies' profits. Perhaps the government is expecting a strong revenues growth?

In the "emergency budget" Osborne announced a huge tax cutting program for corporation tax. Tax revenues from companies will fall over the same time frame that costs rise.

My prediction that they will borrow and QE is looking better every minute. We will be at a debt level of 150% of GDP at the end of this parliament.

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I expect that as unemployment rises substantially more money will have to be cut from other spending to pay for this.

This is roughly what happened under Thatcher.

Yep - there's a graph of it here: http://www.guardian.co.uk/politics/interactive/2010/oct/15/comprehensive-spending-review-2010-public-spending

It's in flash so I can'twork out how to properly embed it here, but it clearly shows how public spending is influenced by social security spending, and how that goes up during recessions.

Also I'm not sure how interest payments fit into all this (they don't appear on the above graph) but I doubt they'll start decreasing overnight.

Edit: the do appear on the graph (light yellow line) and strangely they appear quite low - the magic of QE I guess <_<

Edited by LiveAndLetBuy

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Yes, I agree. Once inflation starts to climb they will BE FORCED to raise interest rates, they would HAVE TO, no choice, otherwise inflation WOULD spiral out of control.....

They have a choice ;)

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I don't see much evidence of genuine private sector jobs being created sure Gordon spunked a load of money up against the wall recently and a lot of it went to the private sector (connaught to name but one of many so-called private sector employers) but that is ending (connaught again).

Half a million public sector jobs to go?

The plateu you see is just the election cycle.

Yes, you may be right. I just think that any change in employment level in the next 4 years, up or down, will probably be small, like 1 or 2% up or down.

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I read on a newsite earlier this week that the Fed in the USA want to "manage" their Inflation at around 4% pa. I guess we will try the same, given that we've mirrored everything else they've done since 2007 onwards........ :rolleyes:

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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