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The Deficit Is Temperary....

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Did anyone catch the liebour MP who said this this morning on Radio 4 when being interviewed about the 30 army job losses made by text? Some dulced toned Scot.

Am I correct in believing that the budget deficit will actually be larger at the end of this parliament than at the beginning, despite all the "savage" cuts? So the host should at least have pushed him on just how temperary "temperary" is, conisdering it is still increasing even now?

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Did anyone catch the liebour MP who said this this morning on Radio 4 when being interviewed about the 30 army job losses made by text? Some dulced toned Scot.

Am I correct in believing that the budget deficit will actually be larger at the end of this parliament than at the beginning, despite all the "savage" cuts? So the host should at least have pushed him on just how temperary "temperary" is, conisdering it is still increasing even now?

Yes it'll be more - but by reducing the rate at which it increases they buy time for Mystic Merv to inflate the debt away to a manageable level.

It's all temporary in the long run mate - even us. :lol:

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Did anyone catch the liebour MP who said this this morning on Radio 4 when being interviewed about the 30 army job losses made by text? Some dulced toned Scot.

Am I correct in believing that the budget deficit will actually be larger at the end of this parliament than at the beginning, despite all the "savage" cuts? So the host should at least have pushed him on just how temperary "temperary" is, conisdering it is still increasing even now?

Helps if people knew the difference between Deficit and Debt!

We have pro rata borrowed less in the 2010/2011 budget year than we did in the 2009/2010 budget year. So the deficit is already REDUCING.

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Helps if people knew the difference between Deficit and Debt!

We have pro rata borrowed less in the 2010/2011 budget year than we did in the 2009/2010 budget year. So the deficit is already REDUCING.

I'm fully aware of the difference thanks, which is why I asked the question. I just thought I remembered seeing in someones sig a claim that despite the cuts, the deficit would still be increasing in a few years time, rather than reducing, so I was wanting to clarify. The debt will still be increasing regardless.

I was more interested in ensuring I had heard that misleading plank on the radio correctly though!!

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Hilarious.

Half of this years deficit goes towards paying off debts created by previous years deficits and thus causes 'cuts' (if any cuts actually exist)

Why is cause and effect so difficult for liebour MPs to grasp? They just seem to assume effect comes out of nowhere, never questioning why.

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I'm fully aware of the difference thanks, which is why I asked the question. I just thought I remembered seeing in someones sig a claim that despite the cuts, the deficit would still be increasing in a few years time, rather than reducing, so I was wanting to clarify. The debt will still be increasing regardless.

I was more interested in ensuring I had heard that misleading plank on the radio correctly though!!

If I remember rightly the effect of the cuts is so paltry (in financial terms - not the human cost) that the yearly deficit will barely change in nominal terms throughout the term of this government if the deficit forecasts of this government are correct. At best it's something like a total deficit for the term cut from £700Bn to £620Bn, i.e. p1ssing in the wind.

However, 4 years of Merv's inflationary low interest rate magic and a yearly deficit of circa £150Bn will be equivalent to about 158p in 2011 terms by 2014, so no worries, aside from the fact you STR fund/deposit will then be worth 0.00000000000005p

That said, we had record-breaking deficits in the months of August and November, so there is still a fair chance that the deficit at the end of this financial year will still exceed the 2009/10 deficit in real terms.

Up the creek without a paddle?

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The deficit will be much lower. The debt will be higher

+ 1

I think that is because our media does not explain the root of the problem - deficit, debt and all that.

It is actually very easy to explain to people what the deficit is. I have done that a few times, to acquaintances and relatives, and I have improved my "technique". Now it takes less than 20 seconds 1 or 2 minutes. This way:

Deficit just means shortfall. In this tax year (2010/11) the Government Revenues are around £550bn/ year, but they are spending £700bn. A shortfall of £150bn. They will borrow to cover this shortfall. (Have a pause here, see if they got it. You may have to repeat these 3 numbers.)
The coalition plan is to gradually reduce this shortfall, and balance the books by the end of this parliament, in 4 years.
We will keep borrowing more until then. Adding to the current national debt. It was at around £900bn when they took power in May, and it will probably be at around £1,300bn at the end of this parliament.

Some people are really very surprised to hear that we are still overspending, and that despite all the cuts, we will still be over-spending all the way until the end of this parliament.

At this point, some show clear signs that they are no-longer sure if they should believe me.

Note that they did understand very clearly what I said. It was not difficult to understand - it is not difficult to understand. But it is so new to them, and so... weird? hard? that they grow suspicious. Once I even said, look, check on Google. These are the 3 numbers (on a post-it) revenues 550bn, expenses 700bn, total debt 900bn. A couple of weeks later I saw him again, and yes he had checked, and now believes / understands. But he still had that same "shock" look he had when I first told him. He was really quiet. And still very surprised, and "pensive". - Yes, a lot to be pensive about! It will take time! For many people.

Sorry, I went on a tangent.

But my point is: Why the press don't explain this deficit/debt thing??!!

Even the Tories avoid this issue! And keep saying "paying down this deficit" - like muddling the issue on purpose! Why?!? It was labour's fault!

Edit: OK, it does take little more than 20 seconds, for the whole thing.

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If I remember rightly the effect of the cuts is so paltry (in financial terms - not the human cost) that the yearly deficit will barely change in nominal terms throughout the term of this government if the deficit forecasts of this government are correct. At best it's something like a total deficit for the term cut from £700Bn to £620Bn, i.e. p1ssing in the wind.

However, 4 years of Merv's inflationary low interest rate magic and a yearly deficit of circa £150Bn will be equivalent to about 158p in 2011 terms by 2014, so no worries, aside from the fact you STR fund/deposit will then be worth 0.00000000000005p

That said, we had record-breaking deficits in the months of August and November, so there is still a fair chance that the deficit at the end of this financial year will still exceed the 2009/10 deficit in real terms.

Up the creek without a paddle?

Yes, I think that the whole plan depends on there being growth, and good growth at that, 2 - 3 %. Spending will rise, but less than the rate of growth, increasing the tax take and reducing the deficit.

Fine plan. Except that if you look at the details, then the wheels look like they are coming off. Real growth in recent years has been paltry, and driven by increases in goverment expenditure. Globalisation is decreasing the prices we can charge for our output from the private sector, private sector wages are stagnant at best. The number of pensioners is going to increase, as is the payout for each and every one of them. And all those tax increases are likely to do their laffer magic, and force people out of the taxed sector. Meanwhile, changes to tax legislation will probably mean that big companies get to pay less tax too.

Increased prices mean higher benefits, as they are linked to the CPI. This becomes explosive when the economy is shrinking, as it means that each and every person on benefits gains a higher proportion of the nation's output, leaving less for those not claiming. As pensioners too will be getting a higher share, there is simply less and less reason to work in the legal sector.

I wonder if those comments Ken Clarke made werent for the benefit of the middle classes so much, but for the bond markets, trying to get them to finance the borrowing needs of the nation for a little bit longer at less than 4%. If bond buyers catch on that the nation's GDP is falling or stagnant, and that producers are being paid less and hence leaving the taxed sector, they may simply decide not to buy anymore Gilts.

I cannot see how we can have any other outcome given the direction we are going in. The only real changes made havent been cuts, but higher taxes, odd given it is a Tory led government. We are headed to an Irish style meltdown. Lord only knows what will happen then, we might be lucky, and get a government that axes all benefits and lets the market sort itself out. We might be unlucky, and have state Marxism a la Albania style. Worse, we might get Ed Balls.

Edited by leicestersq

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Hilarious.

Half of this years deficit goes towards paying off debts created by previous years deficits and thus causes 'cuts' (if any cuts actually exist)

Why is cause and effect so difficult for liebour MPs to grasp? They just seem to assume effect comes out of nowhere, never questioning why.

Have Westminster cut back on the 2 Billion £££+ that they have been blowing on CON-sultants? :o

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Guest sillybear2

The deficit was structural during the NuLabour era even with all the taxes from the bankers illusory ponzi profits. When all that dropped away what was already dodgy became horrific.

Of course this stooge might be speaking the truth, only if Labour now plan huge tax rises to bridge the gap, like 25% VAT, 33% basic income tax, £3k council tax, £2 litre petrol etc. It's doubtful they can extract anything from corporations or the financial sector given they're now given a free pass on avoidance.

Does (Nu)Labour even know where they stand on such matters? Or is this all part of Wallace's blank sheet? F**k knows what the libdems stand for anymore, they seem to spend most of their time on their backs now. At least everyone knows where the Tories are at, you can see Osborne's feet protruding out of Bob Diamond's ass.

Edited by sillybear2

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£170.8 billion current deficit:

25% VAT would raise an extra £26bn a year (Based on 17.5% to 20% rasing an extra £13bn)

Average £3k council tax per home would raise an extra £50 bn a year. (Based on 30mn homes paying average £1.2k)

£2 a litre petrol may cause people to drive less, so might not raise tax income.

33% basic income tax would raise at most £75bn a year.

Your ideas would probably reduce the deficit a bit, but it would be no where near enough to stop the UK debt continuing to rise.

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£170.8 billion current deficit:

25% VAT would raise an extra £26bn a year (Based on 17.5% to 20% rasing an extra £13bn)

Average £3k council tax per home would raise an extra £50 bn a year. (Based on 30mn homes paying average £1.2k)

£2 a litre petrol may cause people to drive less, so might not raise tax income.

33% basic income tax would raise at most £75bn a year.

Your ideas would probably reduce the deficit a bit, but it would be no where near enough to stop the UK debt continuing to rise.

Good thinking.

So raising the council tax per home to an average of £6600 practically wipes out the deficit, assuming that has no impact on anything else like personal spending (silly assumption I know).

Anyone fancy another £6600 of tax?

The trouble is, for the people that have to pay it, the middle classes, this burden would be too much to bear I feel. Either they would protest a lot, and you never know where that may lead, or they will avoid paying it by simply not paying up, or going into the black economy. Not so easy to do with a tax on homes, but people find ways of avoiding taxes when they go up.

The only way to cut the deficit without collapsing the economy completely, is wholesale cuts to the benefits system and public sector wages and benefits.

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Guest sillybear2

Good thinking.

So raising the council tax per home to an average of £6600 practically wipes out the deficit, assuming that has no impact on anything else like personal spending (silly assumption I know).

Anyone fancy another £6600 of tax?

It's already out there, just borrowed from the future, public debt is deferred taxes of course (with interest on top). As you've concluded it's impossible, so they will have to default, either directly or by stealth. Remember the current system has only been in place since 1971, so this is just the end of the beginning.

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Yes, I think that the whole plan depends on there being growth, and good growth at that, 2 - 3 %. Spending will rise, but less than the rate of growth, increasing the tax take and reducing the deficit.

Fine plan. Except that if you look at the details, then the wheels look like they are coming off. Real growth in recent years has been paltry, and driven by increases in goverment expenditure. Globalisation is decreasing the prices we can charge for our output from the private sector, private sector wages are stagnant at best. The number of pensioners is going to increase, as is the payout for each and every one of them. And all those tax increases are likely to do their laffer magic, and force people out of the taxed sector. Meanwhile, changes to tax legislation will probably mean that big companies get to pay less tax too.

Increased prices mean higher benefits, as they are linked to the CPI. This becomes explosive when the economy is shrinking, as it means that each and every person on benefits gains a higher proportion of the nation's output, leaving less for those not claiming. As pensioners too will be getting a higher share, there is simply less and less reason to work in the legal sector.

I wonder if those comments Ken Clarke made werent for the benefit of the middle classes so much, but for the bond markets, trying to get them to finance the borrowing needs of the nation for a little bit longer at less than 4%. If bond buyers catch on that the nation's GDP is falling or stagnant, and that producers are being paid less and hence leaving the taxed sector, they may simply decide not to buy anymore Gilts.

I cannot see how we can have any other outcome given the direction we are going in. The only real changes made havent been cuts, but higher taxes, odd given it is a Tory led government. We are headed to an Irish style meltdown. Lord only knows what will happen then, we might be lucky, and get a government that axes all benefits and lets the market sort itself out. We might be unlucky, and have state Marxism a la Albania style. Worse, we might get Ed Balls.

Great post.. the only real way out is growth. Without strong economic growth all these promises cannot be met.

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  • 312 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% +
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      • Even
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