£12 billion black hole has opened up in UK public finances

pqrdef

Pennywise wrote: »

Well, the dole and sick pay isn't restricted to workers is it?

Used to be. Entitlement depended on a near-full recent record of Class 1 NI stamps, i.e. stamps with an employer contribution on top of the employee contribution. Self-employed, forget it.

Full state pension also depended on 40 years' stamps, though self-employed and non-employed stamps also counted. Fewer stamps, smaller pension.

Pennywise wrote: »

Alternatively, how about some form of unearned tax supplement

You try telling people their pensions are unearned. I'll run for cover before the explosion.

Pennywise wrote: »

NIC has never been ring-fenced for the welfare state

Used to be. There was a Ministry of National Insurance which collected and paid out the money quite separately from the tax system. Later it was merged into the DSS, so still separate from the Treasury. How do you think NI got to be the way it is?

purch

Taxation needs to go back to its historical levels

How Historical ?

......or are you confusing historical with hysterical :eek:

Old_Slaphead

pqrdef wrote: »

I remember when it was 8s 3d in the £, that's 41.25%. With NI on top. Top rate I think was 98% at one point.

But there were also 2 lower rates 2s 0d and 4s 0d and there was 2/9ths EIR (Earned Income Relief) in addition to Single & Married PA (Personal Allowances)

pqrdef

worldtraveller wrote: »

However those specific austerity measures may end up having to be extended beyond 2015.

Benefits are being cut permanently, not just temporarily. RAF bases are being closed and demolished, not just mothballed for a few years. Mere temporary cuts would just be one-off savings, they wouldn't change the structural deficit at all.

How does one "extend" a measure that's already permanent in its effect? What could not extending it mean?

This year, the government introduces as many cuts as it can bring in immediately. This reduces its annual overspending by £N1bn p.a..

Next year, 2012-13, all those cuts remain in effect, and a further tranche of new additional cuts is brought in - cuts that can now be made that couldn't have been made earlier. Total deficit reduction will now be £(N1+N2)bn p.a.. Note that the cuts made in the first year are saving another £N1bn in the 2nd year, over and above the £N1bn they saved in the first year (OK I'm ignoring part-years).

And so on. By 2014-15, we have four tranches of cuts and more cuts piled up one on top of another, total deficit reduction now £(N1 + N2 + N3 + N4)bn p.a. This is the target.

In year 5, no *new* cuts. But all the previous cuts are still saving money, so the deficit is still reduced by £(N1 + N2 + N3 + N4)bn p.a.. And so on in year 6, 7, etc.

Total money saved in the first 4 years, £(N1 + (N1+N2) + (N1+N2+N3) + (N1+N2+N3+N4))bn. But that's not the point. The point is that the government will have downsized its lifestyle so that it now knows what it can and can't afford while living within its means.

Analogy. Suppose it's true that an adult male needs 2500 calories a day. If I'm eating 4000 a day, I'm putting on weight, so I'm getting fatter and fatter.

Suppose I announce that I'll gradually trim my eating habits - every day 50 calories less than the day before - so as to reduce my daily comsumption from 4000 to 2500 over the course of a month. By the end of the month, I'll have trained myself in healthier eating. I won't have lost any weight, because actually I'll have been overeating the whole month. But I won't put on any more weight from now on *so long as I stick to my new 2500-calorie habit indefinitely from now on*. What I mustn't do is say right, job done, end of austerity, and revert to my old habits. Austerity is the new normal.

Now suppose I've miscalculated. The cuts I've planned will only take me down to 2800 a day. (Actually it's neither here nor there what timescale I spread them out over.)

Now, the only way to get down to 2500 a day, on whatever timescale, is to find something else to cut out. There isn't some mysterious alternative of "extending" the planned cuts to make them cut deeper. Maintaining the 2800 a day into the second month doesn't do it. The plan was to be on 2500 a day in the 2nd month.

hallmark

Not sure if this latest study is factoring in everything. An article I read recently was highlighting how the high rate of inflation coupled with low bond rates is actually getting rid of the deficit faster than was expected. That sounds plausible to me, it's very obvious that our Govt & other Govts are trying to inflate away as much debt as they can on the sly. I think the current status quo of 5% "official" inflation coupled with approximately 0% payrises in the private & public sector would suit the powers that be very well indeed for as long as they can prolong it.

heathcote123

MFW_10YRs wrote: »

Taxation needs to go back to its historical levels. We used to have 25% Basic Rate tax and subsequent governments have reduced this down to the current 20%, funded for the most part by borrowing. It wouldn't surprise me if we see a return to 22% in the short term with perhaps a reduction in the 40% tax threshold to capture more people.

Hopefully once we get past the current financial difficulties we will see a return to 25% basic rate tax and an increase in the higher rate tax threshold so that it returns to being a tax for the higher paid.

The government just needs to stop trying to be all things to all people. Leave people alone, they'll generally get by.

Butterfly_Brain

Well maybe if they used the money that they have set aside for foreign aid it might help balance the books.

Kennyboy66

worldtraveller wrote: »

Ministers are set to be told this autumn that a £12 billion black hole has opened in the public finances, in a forecast that threatens to derail the coalition’s deficit reduction strategy and prolong austerity well into the next parliament.

The Financial Times has replicated the model of government borrowing used by the independent Office for Budget Responsibility, which suggests the structural deficit in 2011-12 is now £12bn higher than thought, a rise of 25 per cent.

With only two months to go before the chancellor’s autumn statement on November 29, the coalition is on course to face the choice of prolonging austerity measures well into the next parliament or to introduce more spending cuts or tax increases to balance the government’s books on the current schedule.

Putting the public finances back on track at the next Budget would require the equivalent of raising value-added tax from 20 per cent to 22.5 per cent.

FT

Bloomberg

Not good news........._pale_

its a balancing act but increased austerity will lead to lower growth will lead to bigger gap again.

Obvious solutions might included;

1) not increasing the aid budget by quite as much as planned.
2) nor uprating pensions & benefits by the full RPI/CPI
3) reversing the stupid 1p cut in fuel duty that cretin Osbourne pulled out the hat at the last budget.
4) More QE - a bit more growth and a bit more inflation.

1984ReturnsForReal_2

Well, as they are going to start infrastructure projects it all looks good.

You know, those infrastructure projects they cancelled at the drop of a hat last year.

Idiots.

Rochdale_Pioneers

What do you expect? Last year's political budget only added up if the private sector generated 1.4m net new jobs by 2015. As that has been proven to be laughable it means lower than expected tax revenues and higher than expected benefit bills. Which means the deficit won't be gone by the March 2015 "here's your tax cut" budget.

Though I expect the tax cut to stay. I expect my penny off income tax will be funded by providing sackcloth to the disabled as opposed to benefits or food.