UK public borrowing higher than expected in April

angrypirate

In other news
http://www.bbc.co.uk/news/business-13519792
There was some good news for the government as borrowing figures for the year to March 2011 were revised downwards to £139.4bn, from £141.1bn

ILW

Sir_Humphrey wrote: »

Re Kennyboy66.

I think we need to concentrate on the demand side rather than the supply side reforms you suggest. Doing things such as cut the minimum wage would just reduce demand. Assuming that cutting HSE and red tape would help is questionable; industrial accidents are very expensive. Regarding red tape; one person's profit is another person's loss. Companies make money printing signs and selling safety equipment.

For those who need an explanation. This is largely down to inadequate growth. Looking at spending levels misses the point; if you get low growth and higher unemployment than is otherwise the case, then spending increases happen (due to benefit payments) and tax take decreases (less private income and spending = less tax). This results in an increase in the deficit. Most spending is not discretionary.

As I have said before, this is why you cannot cut your way out of a deficit unless there is strong growth in the international economy.

In your opinion, is growth something that can be sustained forever, or does there come a point when it has to slow down and people accept that they may only have a similar standard of living to their parents?

Sir_Humphrey

ILW wrote: »

In your opinion, is growth something that can be sustained forever, or does there come a point when it has to slow down and people accept that they may only have a similar standard of living to their parents?

You need growth to maintain parity in living standards due to rises in population (even if you do not have immigration BTW) and productivity (which reduces employment by reducing the need for labour).

If you have zero growth (or indeed below about 2% PA IIRC) then you will end up with a worse standard of living.

Of course all that assumes you actually share in the growth (which is not currently the case as the rich take more of it).

Kennyboy66

Sir_Humphrey wrote: »

Re Kennyboy66.

Doing things such as cut the minimum wage would just reduce demand.

Do we know this for sure ?

Surely this is only the case if the reduction in income for those currently employed, exceeds the increase that those who get employment at the lower market rate.

In addition, the minimum wage doesn't help the poor, the young and unskilled in the current environment - it just excludes them from the labour market.

This is the first recession I can remember where private sector wages have in many areas responded to market conditions. Whether that is via pay freezes or temporary cuts or short time working doesn't really matter - but it has kept people in employment.

The main increase in unemployment seems to have been with the under 24's - very few are going to get a Public Sector job of any sort - even the much derided YTS would be better than the current situation.



I'd also partly agree with your demand side argument, and the biggest failure here of the government is slashing investment spending while protecting transfer payments to pensioners and social security payments. Investment spending would at least increase the productive capacity of the country (spending on road for example).

Sir_Humphrey

Kennyboy66 wrote: »

Do we know this for sure ?

Surely this is only the case if the reduction in income for those currently employed, exceeds the increase that those who get employment at the lower market rate.

You need to be able to earn a certain amount to be able to live.

I would expect people to lengthen their hours instead.

kabayiri

On a local level, have you noticed just how much the grey/black economy is growing ?

No wonder tax receipts are slipping.

michaels

You seem to contradict yourself between your first two paragraphs p1 you need growth to me at least as much as population growth to maintain gdp per head (tick)
p2 If you have growth of less than 2% you end up with a lower standard of living (only if you have population growth of at least 2%)

P3 - isn't income distribution a separate issue to growth? Why are you linking the two?

The main reason for the higher borrowing requirement compared to 1 year ago appears to be the one off impact of not having the bank bonus tax and yet three labour hacks have turned up today to tell us how one months random noise it all the Tories fault.

Sir_Humphrey wrote: »

You need growth to maintain parity in living standards due to rises in population (even if you do not have immigration BTW) and productivity (which reduces employment by reducing the need for labour).

If you have zero growth (or indeed below about 2% PA IIRC) then you will end up with a worse standard of living.

Of course all that assumes you actually share in the growth (which is not currently the case as the rich take more of it).

Sir_Humphrey

michaels wrote: »

You seem to contradict yourself between your first two paragraphs p1 you need growth to me at least as much as population growth to maintain gdp per head (tick)
p2 If you have growth of less than 2% you end up with a lower standard of living (only if you have population growth of at least 2%)

No, because of other factors such as technological progress and improvements in productivity. To use an example popular in the papers; tube trains. Now you have one person per train. There used to be two (driver and guard). Before sliding doors were invented, you needed one person per carriage to open and close the gates.

P3 - isn't income distribution a separate issue to growth? Why are you linking the two?

Because just because you have growth does not mean that living standards improve for most people. If (to illustrate) you had an economy of ten people, and only one person received proceeds from growth then the median (and upper quartile) improvement in living standards is zilch.

The main reason for the higher borrowing requirement compared to 1 year ago appears to be the one off impact of not having the bank bonus tax and yet three labour hacks have turned up today to tell us how one months random noise it all the Tories fault.

I seem to recall some people saying that would not yield much money, and that taxing the rich would not close the deficit. Hmm.

It is a factor towards the high figure, but the plan is to be reducing the deficit now. To do that there will need to be higher growth.

I can assure you that the cuts have already started. However that only effects the parts of spending where the govt has a choice (discretionary spending). So you can have a cuts programme resulting in higher overall spending. This is what happened in the early 1980s.

chewmylegoff

chucky wrote: »

the current government will end up being no better than the last lot.

that i can 100% agree on.

globalds

Kennyboy66 wrote: »

I was specifically talking about improving the business environment.
To be specific it could include (and an obvious problem is the European part of some of the below).

1) scrapping some H & S legislation

2) Scrapping the working time directive

3) Not bringing in things like the driver CPC which is due from next year.

4) Scrapping the minimum wage (particularly under 18's and perhaps higher)

5) Extending VAT exemption for small businesses.

6) Reducing "green" legislation.

7) changing some employment law, which in certain areas is weighted too favourably towards employees (and lawyers).
.

Just out of interest ,if any or all of these changes were made ,would there be any negative effect on you personally ?