(Limited) room for manoeuvre on borrowing?

I think we all knew that figures had to take an upward-turn. The point is that when the economy recovers what are Labour going to do about the fact that they are dead set against it? It just further underlines their reputation for fiscal incompetence.
Maybe we can then just keep quiet, work hard and leave the economy to recover on it's own.

The government talks of cuts, when Treasury figures show total public spending has risen in every month since the coalition was formed. https://www.johnredwoodsdiary.com/2011/01/17/deficir-reduction-and-cuts/
Now they are playing down these better than expected £3.7bn surplus. What ties them together is that the government is desperate to stop us asking for pay increases even as inflation tops 5%. They make the public sector think their are cuts so that they would feel greedy asking for a nominal pay increase to match inflation.

"It is a peculiar feature of the current political debate that ministers are keen to talk down any sign that the public finances are stronger than we might have thought, but equally keen to talk down signs of weakness in the economy. "

It's not peculiar - it's called 'not knowing which way to turn' - it happens when panic is afoot.

"However, we can surely say, on the basis of these figures, that the economy is unlikely to have continued shrinking in January."

Don't get too comfortable...the falls in teh Asian stock markets overnight and the continuation of that in Europe is a sign that the oil price fear is taking hold.

Did anyone mention the west struggle to grow economically with a high oil price?
....must have slipped their minds...

I'm sure the Government will play down anything that undermines a basis for putting the ordinary person under the cosh.

It might be that overdue HRMC tax is being paid back or that assets are being sold and the capital gains tax paid. It doesn't necessarily mean growth - it might mean consolidation ready for what's to come.

Appropriately cautious language from Stephanie.

Maybe it will eventually turn out to be a false dilemma vis-a-vis the King/Osborne versus Bernake/Obama approaches to reviving the respective economies i.e. both could work.

A big negative has been the lowest level of house-building since something like 1923 in England and of course, there are still all those public sector job cuts in the pipeline.

The forthcoming Osborne budget really does have to be revolutionary in terms of reviving the animal instincts/economic growth but I doubt if he can pull it off.

It would be good for England to be proved wrong on that.

They are not getting excited as there is nothing to be excited about - once the surpluses are annual and total debt is being repaid rather than added to, then a very small cheer may be in order.

Now a trade surplus that would be worthy of cheering....

A long long uphill road ahead - not time for self congratulation yet.

Steph,
"But these are not numbers you would expect to see if the British economy was suffering a prolonged downward lurch. "

On the contrary, excluding the effects of the snow, the high tax receipts are actually what's caused the 4th qtr contraction in the economy, and another negative quarter is entirely possible.

Kind Regards

Last year, January was a shocker: the government borrowed £1.3bn, the first January deficit since they started reporting monthly numbers. The consensus forecast for this year was for a tiny surplus - maybe £0.1bn. Instead the Treasury took in £3.7bn more than it spent, the largest surplus since before the collapse of Lehmans.

_______________________________________________________________

That explains why the rest of us are suffering.
Govt budget surplus means non government deficit.
Wonderful news. Oh well, as long as he reaches his target.

That's January's figures out of the way then. Which leaves the rest of the year to look forward too........

https://www.thisismoney.co.uk/interest-rates

https://planetforward.org/2011/01/06/2011-still-wolfing-down-fossil-fuels/

https://www.irishtimes.com/newspaper/letters/2011/0222/1224290509997.html

https://www.bloomberg.com/news/2011-01-05/global-food-prices-climb-to-record-on-cereal-sugar-costs-un-agency-says.html

As you write: "Some of the growth is coming from higher inflation (ie growth in nominal GDP, rather than real), and naturally the figures are somewhat backward-looking."
Meanwhile, over 100 EU international organisations are calling on the G20 Finance Ministers to rein in SPECULATION on food prices by banks, hedge funds and pension funds.
The world is experiencing record food prices which are at dangerous/starvation levels (World Bank figures) with 44M more people pushed into poverty since last June.
French President Nicolas Sarkozy, currently the head of the G20, is pushing for TIGHTER REGULATION OF COMMODITY markets in order to reduce food price volatility.
There are worries that some governments, INCLUDING THE UK, could try to block reforms in the EU and G20 due to fierce opposition from the banking industry, the one industry that is certainly not starving.
Political leaders are warned that immediate action is needed to tackle excessive speculation in food commodity markets: This is urgent. Prices in agricultural and food markets are becoming more volatile with each month. Unless steps are taken to stop EXCESSIVE SPECULATION, it is only a matter of time until a new page is written in the global food crisis and every second word will be "disastrous".
Rampant speculation by a few super-rich financial traders is driving food prices to record highs and causing untold suffering around the world. By taking action now to curb excessive speculation on food, G20 leaders could save lives, reduce chronic hunger and prevent civil and political unrest.
So, I hope you'll excuse me if I can't get too excited about whether the UK GDP, etc are on track. I am far more excited (agitated) about the manner in which the banking sector in the UK is contributing to world destabilization, poverty and pending disaster.

And the fall in borrowing has happened before the government cuts get into their stride. In local government which is at the front line of the cuts programme the real effects start coming through this April onwards but what will be the effect on the deficit when redundancies and frozen contracts go through. Economic growth will be negatively affected by the 5+% inflation with small or nil pay increases and this will feed into the flow of taxes and the need for more benefits. The next three months will show where the economy and the deficit are headed for the next year.

If the tax take is on course and continues that way (a big IF) then inflation becomes a worry. At least we have the weapon of interest rate increases to control it.
A part of the reason that the deficit is so large is that the public sector has grown at the expense of the private sector, and the previous government spent every penny and more when times were good. If the present policy is to encourage industry then there may be hope.
Governments do not change things overnight and only affect things at the margin ie if industry is marginally more profitable it will increase, but it takes time.
But all one can say of these figures, which the government is saying, is that one swallow doesn't make a summer.

And just think how better it could be if corporation tax was higher than the average of a couple of percent. If every country agreed to a universal flat rate instead of claiming the low rates are due to international competion, then the rest of us plebs could reap more of the wealth created by our sweaty brows and have less pain with finding a library. But no, this will never happen because those who gain from low corporation tax are the same who rule us.

Hey Ho, happy days.

"(Limited) room for manoeuvre on borrowing" is the title of Stephanie Flander's blog.

Financial services; investment banks and so-called 'pension providers' run by the few, still take £$billions in payments from the many, with no intention of returning, unless forced, but a tiny fraction of those billions - yet are still with us?

Union Leaders; MPs, MEPs, Ministers; CEOs of Local Authorities; CEOs of hospitals are an 'elite' group ... untouched by pension collapse suffered by millions in any other occupation. Why is that?

You pay your pension contributions via your employer - your employer goes bust - and is taken over or 'reborn' somewhere else. Where have all your pension contributions gone?

Plus, you have worked as a public employee for decades and contributed your pension payments. Suddenly, YOU and your job has been 'sold off' or privatised and you are 're-employed' to the same job by a 'contractor' who you know is taking the mickey out of your local authority or hospital for a presumed lower cost - but a shabby and more destructive cost?

Hospital toilets and ward cleaning - disgusting. Nurses are blamed for dirty wards - but if the cleaners are 'privatised' and not 'in-house' - then there is no point in a Matron who has no control over private cleaning companies?

Have I rambled - YES. Any regrets - NO.

"But these are not numbers you would expect to see if the British economy was suffering a prolonged downward lurch."


Surely you should also consider whether the level of un and under employment is an indicator of whether the economy is lurching forwards or backwards, not merely whether holders of capital are getting nice juicy returns or not.

This comment was removed because the moderators found it broke the house rules. Explain.

The reason why another contraction is possible in 1st Qtr is because looking at the 'private household sector balance' for 3rd Qtr 2010, this is barely positive at all compared to the start of 2010, indicating that the remaining stimulus in the economy has become exhausted. Therefore the combination of high tax levels; high drag caused by high prices makes the tax levels act as excessive drag on demand.

The economy will be in freefall imminently!

SF ends with

'Income and capital gains tax receipts were up 18% year on year, and corporation tax receipts were up 13% on the same basis. Some of the growth is coming from higher inflation (ie growth in nominal GDP, rather than real), and naturally the figures are somewhat backward-looking. But these are not numbers you would expect to see if the British economy was suffering a prolonged downward lurch.'

A quick explanation of what has happened. In tax year 2008/09 many traders and limited companies made losses/had massively overpaid their payments on account when the recession hit and therefore not only paid no tax in January 2010 but also actually got tax paid back by the government by relieving their losses against the previous years profits.

In tax year 2009/10, which it should be noted has absolutely nothing to do with whether the economy grew or shrank in December 2010! as it finishes on 5th April 2010, those companies that continued to make losses could not carry them back as they had no profits to relieve them against, they have simply paid no tax. Payments on account are based on previous years tax payments so for everyone who paid no tax in 2008/09 then all their tax payable would have been due in January 2011 again producing a very high January figure.

Bearing in mind the article only compares January 2011 tax receipts with those of January 2010 it is simply explainable by the above.

This is my explanation of the figures - it may not actually be right but SF's 'analysis' is very light touch to say the least.

This comment was removed because the moderators found it broke the house rules. Explain.

Why do I keep getting a vision in my mind's eye of an old moustachioed Prime Minister wearing plus fours as he comes off the grouse moor gruffly mumbling `events, dear boy, events'.

So, it is all steady as she goes which is fine by most of us. But what happens next?

I am not one of those adrenilating souls looking for the revolution or even a couple of days dossing in a public square somewhere unhealthy, but a person who wants to see a value adding economy once more established in this country. I am sorry but a percentile `growth' tells me nothing much.

Now it seems that young George has done the sensible thing with the fiscal deficit but this was a no-brainer. Just because the previous government was a complete failure should not colour our perceptions as to how this one is doing.

Now what about the other trickier bits of the economic equation? The training, the investment, the exports, the jobs, the banking reform, the demand, the inflation and interest rates. We need a return to value, real growth in a real economy. This requires policies and some leadership neither of which are currently apparent.

Speaking of growth (or the lack of it)

Does nayone know what happens to the US and UK economies when the oil price rises to 'unprecedented levels'?

Economic capitulation.

Growth will be largely dictated by the oil price now - if you think the snow 'ground the country to a halt' - what do you think rampant petrol prices are going to do???

Walking into a nightmare - and all we have is our slippers and dressings gowns on...

15. At 1:03pm on 22 Feb 2011, corum-populo-2010 wrote:

"Have I rambled - YES. Any regrets - NO."

I'm proud of you rambling - sometimes it's the best way to summarise the absurdity of it all and bring yourself back to sanity.

Please ramble away - your rambles are always welcome here.

It is good that we have some slightly better borrowing figures for the UK.Let's hope that they continue on an improving trend.

However this blog seems often to let us know the thoughts of Ed. Balls the Shadow Chancellor but when the numbers go against him (in his leadership campaign he argued for no action on the deficit) we hear nothing at all...

1. At 12:16pm on 22 Feb 2011, Peter White

Peter - you clearly DID NOT set the tone of this blog with your opener!

Maybe it's time you left Millbank for a job with a better outlook and prospects.

Quick, quick, hide the story or the great unwashed will question the cuts.

I think we got away with that. Privatisation anyone?

Steffie,
It should be remembered that January saw a peculiar form of extra, advance, corporation tax from the retail sector. Many retailers, heavily discounting goods in sales, were then paying an extra 2.5% VAT to HMRC. This will be reflected later in less good CT payments at end of year time.

@1"I think we all knew that figures had to take an upward-turn. The point is that when the economy recovers what are Labour going to do about the fact that they are dead set against it? It just further underlines their reputation for fiscal incompetence.
Maybe we can then just keep quiet, work hard and leave the economy to recover on it's own."

a) Of course tax receipts were going to take an upward turn, my tax bills have - VAT, tax on fuel, income tax etc etc etc, this has NOTHING at all to do with an economic recovery

b) Labour (not that I'm a supporter of them) never seemed set against an economic recovery, set against massive cuts WHICH HAVE YET TO TAKE REAL EFFECT they certainly are (I don't actually agree with that stance either) but the current 'surplus' in January has nothing to do with cuts which aren't saving anything yet.

c) The economy isn't recovering, nor is it going to with the policies currently played by both Labour and Conservatives - both of whom are totally incompetant.

What is needed is a plan...
a) Buy BRITISH with British tax payers money - scrapping the Ark Royal has lost a large number of Royal Navy jobs AND has created a number of BELGIUM and EGYPTIAN ones - because we are actually using BRITISH money to pay the Belgiums to use Egyptians to pull her apart!!!!! For heavens sake we have a yard in Tyneside that pulls unwanted Naval ships apart that employs BRITISH people. Using BRITISH people cuts the welfare bill AND produces tax recepits. Just look at the collosal expenditure of British tax payer money abroad and realise how many British jobs that represents!

b) We need to get banks lending to small business, they aren't doing this, and it is business that needs to invest to create growth. The banks currently offer loans at unaffordable interest rates (this is why Barclays claims that 75% of all loan applications are approved - most business can't afford to apply at the collosal interest rates). This is easy to solve - we OWN two of the banks so we TELL them what to do - don't pay million upon million in bonus and instead lend money to British business at 1% APR.

These two small actions will go an awful long way to creating an economic recovery, neither woudl cost the government any money either!

There are other things to do with simplifying welfare and tax that would also help - and would save billions, but that can be for another post.

6. At 12:42pm on 22 Feb 2011, JohnConstable wrote:


Maybe it will eventually turn out to be a false dilemma vis-a-vis the King/Osborne versus Bernake/Obama approaches to reviving the respective economies i.e. both could work.
-------------------------------
Bernanke/Geithner?

This comment was removed because the moderators found it broke the house rules. Explain.

"The first is that the Treasury doesn't want you to get too excited about them."


Why is this?


The reason is that the increase in tax take is due to Self Assessment returns due in January.


The self assessment is for tax year 2009-10. i.e. When Labour were in power.

Sorry - can someone remind me which decade we're in again?

https://www.bbc.co.uk/news/uk-wales-south-east-wales-12526733

"I'm just the one in ten......a statistical reminder of a world that doesn't care...."

Self assessment receipts in January relate to personal tax liabilities on earnings or profits and gains generated in the year ended 5th April 2010.Corporation tax is also essentially paid in arrears as well and so
January tax receipts tell us nothing about the performance of the economy over the last 9 months.I think they more likley indicate the revival of profits in the 2009/10 fiscal year following the very bad
2008/9 year.
So Stephanie it is perfectly possible to have strong tax reciepts but
week growth.

@14 "And just think how better it could be if corporation tax was higher than the average of a couple of percent"

This is easy to fix. We should tax all companies HERE on the business TURNOVER they acheive HERE.
As in 'Arcadia group' - they should pay tax on the TURNOVER of their UK shops.
Same for Barclays - tax on the TURNOVER achieved in the UK...

This way we achieve THREE things
a) We extract a reasonable amount of tax - just look at Barclays, paid more in bonuses to their employeees than to the country.
b) We achieve a level playing field - Freds Corner Shop pays its tax here and can't have a 'foreign tax haven' in which it pays zero tax, thus Fred is ALWAYS at a fiscal disadvantage compared to say Tesco. By taxing on turnover we tax Fred AND Tesco at the same rate.
c) We encourage export - sales abroad are not turnover here, we need to start exporting and bringing in foreign cash.

Imagine being an Egyptian - average income $2per day, no welfare state, living on your wits, networks and family and with the country dependent on US aid.Your neighbours are Israel, Jordan, Saudi, Sudan and Libya. How would you get on?
Now that the UK is trying to return to an 'affordable state', both for the country and for individuals, perhaps we can try to appreciate the important things in life, stop awarding ourselves 'rights' that we cannot afford and also stop endless whingeing about the banks. The January figures are at least possible evidence of a very small step in the right direction.

19. At 1:11pm on 22 Feb 2011, GRIMUPNORTH77 wrote:

"Bearing in mind the article only compares January 2011 tax receipts with those of January 2010 it is simply explainable by the above."

This is a common problem in the media - they often mix up y-o-y comparisons with m-o-m and absolute comparisons - which merely confuses the people.

Over the course of the last year or so there have been a lot of y-o-y comparisons making the headlines - why?

Well when you come off the back of an awful year - any y-o-y comparison looks good - even if the entire economy sat around and unproductively played with itself for 12 months!

At least SF bothered to point out how the comparison was defined - in some papers they don't bother!

So the real questions coming out of these figures are:
Assuming that borrowing for this year comes in below forecast how much extra money will George Osborne have to play in the next budget? – my guess is something in the region of £5-10bn.

And what will he do with it? - My suggestion would be to split into 1/3rds. A 1/3rd towards reduced taxation, 1/3rd towards higher spending, 1/3rd towards paying the deficit down faster. At the higher end of my forecast that could be £3bn extra to play with each in terms of reduced taxation and lower public spending cuts.

Personally I’d like to see a focus towards economic growth through investment (such as through the Green Investment Bank and the new Local Enterprise Partnerships) but also perhaps some targeted assistance towards local authorities that are having to implement the biggest cuts – particularly our core cites. In terms of reduced taxation I can see the ‘fuel stabiliser’ being an obviously good candidate at the current time that would also have the benefit of bringing into the taxation system another natural stabiliser – so should the world economy tank and oil prices fall then the government could receive higher tax from fuel but at a lower overall price level than is current.

I have been reading a few right wing commentators on these figures and they are getting a bit nervous that the government may be tempted to spend a little money or not cut as much. They are nervous because the reasons for our deficit may get out of the bag.

What these figures show, is that although there is no doubt that cuts need to happen to reduce over all public expenditure, the way the deficit will actually be dealt with is by the economy growing and the tax take increasing.

The deficit was around 3% before the credit crunch. The rapidly rising deficit arose due to the reduction in tax take - explanation https://bit.ly/eqcRfq

As the economy grows the deficit will reduce to a much more manageable rate. Cuts will be important but not on an ideological basis in the way Osborne, Pickles and the like feel is necessary.

Those on the right may have their bubble pricked if the coalition can nurture a growth strategy.

19 I have to say that makes sense! Good analysis IMO.

re #1
Long way to go yet.

And with events in a significant gas and oil exporter, one does wonder if we are going to be in a 1970's situation?

Government cocks up economy. Takes corrective measures, some wrong, some right. External events come along and throw things off course.

Big lesson for GO and the next Budget, there.

I find the N.Labour situation fascinating. Miliband, to my mind, is in the worst position of all the party leaders, including the small ones. He has a party in disarray, without policies and jumping up all the time with stupid comments to the press.

Chuka Umunna's comments about Barclays profits at the weekend show the weakness of N.Labour as did the retail figures earlier in the week. All those MPs plus the Shadow Chancellor denouncing GO for mentioning the ONS' reason for December's bad figures, then having to eat crow when it is demonstrated that the bad weather did have an effect exactly as stated.

It's all to do with confidence.
Too much and we take our feet off the pedal and fail to reach our targets.....too little and we are too scared to take the necessary steps to reach our targets.

Stephanie

On the one hand these numbers are positive, i.e. indicate a possible reduction of the deficit below the target for the end of the year, but as you rightly point out, above they seem to be due to what would be termed "exceptional items" in accounting terms by auditors.

The real numbers that will have the most significance will be the end of year outturn. It will be then possible to judge if the government has worn the hair suit too tightly.

We will also be able to observe the first estimates for Q1 GDP in April too. The combination of the two along with the budget will reveal whether the government has a plan beyond cutting back public expenditure and if not how much growth will be depressed by the cuts.

I for one, will not be crying wolf yet, or putting out the bunting either, for that matter.

Response to post 23 @ 1:37pm on 22 Feb 2011 - 'writingsonthewall'.

Thank you. I genuinely appreciate your response. Kind regards.

@22. At 1:36pm on 22 Feb 2011, writingsonthewall wrote:

"Walking into a nightmare - and all we have is our slippers and dressings gowns on..."

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

....but not everyone's choice....

https://www.bbc.co.uk/news/entertainment-arts-12524131

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

For those with any doubts about where we're headed, here's a link to an interesting video "Why We Fight" posted by someone else in a previous life. Fashion sense does not seem to play a big part in this story either:

https://video.google.com/videoplay?docid=9219858826421983682

#21 stanillic,

We have been saying the same thing for years! Now, if we can identify the true need (and be consistant in proclaiming it) why can't our lords and masters?

This data should not be 'reassuring' as the problem of private debt and a proper price for money are STILL not even being addressed!

Well, Obama's Treasury Secretary, Tim Geithner has endorsed the Osborne policies as 'very good' and compliments the Coalition for adressing the deep deficit problem not caused by them but by, presumably the Brown/Balls Labour team.

Thanks for reporting that as well as this faintly encouraging news about the fiscal outturn for January.

PS Given that expenditure has risen since the Coalition took office, perhaps we should be told when the 'cuts' are actually happening!

Over to you, Stephanie.

1. At 12:16pm on 22 Feb 2011, Peter White wrote:
"I think we all knew that figures had to take an upward-turn. The point is that when the economy recovers what are Labour going to do about the fact that they are dead set against it? It just further underlines their reputation for fiscal incompetence.
Maybe we can then just keep quiet, work hard and leave the economy to recover on it's own."

If you weren`t blinded by partisanship and looked at the evidence you will see the economy has been recovering since the last quarter of 2009.

A recovery that owes a great deal to the fiscal and monetary measures put in place by the Brown government.

What the latest public finance figures suggest is the deficit is declining as a result of economic growth,and the hysteria over the deficit was manufactured for political purposes.

So the idea "Labour is dead set against it." is false.

This comment was removed because the moderators found it broke the house rules. Explain.

@35. At 1:59pm on 22 Feb 2011, mosman2 wrote:

For an explanation of why the January figures are not any sort of evidence of a very small step in the right direction see 19. At 1:11pm on 22 Feb 2011, GRIMUPNORTH77 wrote:

Regarding banks.....um.....where to start!?! May I suggest you browse through a random selection of the past 3 years blogs by Robert Peston or Stephanie Flanders for a rebuttal. It shouldn't take too long for the penny to drop.

Up2Snuff @ 29

It should indeed have read ... maybe it will eventually turn out to be a false dilemma vis-a-vis the King/Osborne versus Bernake/Geithner approaches to reviving the respective economies i.e. both could work.

POTUS Obama probably knows as much about economics as me, that is, very little and is therefore heavily dependent on his advisers.

Let us hope he is not dropped in it like Bill Clinton i.e. I am abolishing this obscure piece of 1930's legislation that is not longer relevant - Glass-Steagall.

The increase in income tax receipts in January is probably in quite large measure caused because HMRC has become much more aggressive abpout being paid on time than it was a year ago. I say that as a practising accountant who has seen the change. In many cases, the aggressiveness is accompanied by unnecessary rudeness, which is a decidedly unfortunate development.

17. looks like I've been moderated, and only my fourth ever post (I think) and all it was was some innocuous comment about the frequency of blogs! Some people must be very sensitive.

22. At 1:36pm on 22 Feb 2011, writingsonthewall wrote:
Speaking of growth (or the lack of it)

Does nayone know what happens to the US and UK economies when the oil price rises to 'unprecedented levels'?

Economic capitulation.

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

The oil price is going to stabilise. I know that because the US have issued a request for OPEC to increase production in response to the likely disruption to Libyan and other supplies. So everything's going to be just fine.

Mind you, that is the only statement I've heard from the US on Libya since before the weekend, despite Gaddafi's henchmen using anti-aircraft missiles against crowds of protesters (as reported on this website) and mercenaries being used to assault women and children (also reported on this website). Whereas they couldn't resist giving their two cents regarding Egypt even though the worst atrocity there was a cavalry charge by a herd of camels (though I'm sure that was no picnic either). Perhaps it's because foreign cameras aren't allowed in Libya - if you can't see it on Fox News then it can't be happening is the attitude I guess.

I have been saying to people all year that Jan 2011 will be a cracking month for tax receipts. There is an obvious answer to this. I am a practising Chartered Certified Accountant and Chartered Tax Adviser and like many others up and down the country have been advising all my wealthy clients to empty their companies of accumulated cash and take as much personal income in 2009/10 as they can and pay tax on it at 40% rather than the 50% (actually it is up to 60%) tax rates in 2010/11. Also people have been crystallising capital gains in 2009/10 to take advantage of 18% CGT rate, rather than 28%. Such a windfall will not be repeated next year, unless of course there is a further tax change announced that changes behaviour.

35. At 1:59pm on 22 Feb 2011, mosman2 wrote:

"The January figures are at least possible evidence of a very small step in the right direction. "

Evidence?

Stephanie says: "The more obvious, second, point is that the economy seems to be growing." It seems to me that the obvious point is that these are the receipts from the Labour recovery which lasted until the end of last summer and has now been crushed by the government's irresponsible talk last summer about its dramatic cuts and poor economic prospects as a result of its spending review (even before its cuts hit en bloc). This may be the last to be seen of Labour's support for the economy, jobs, homes and businesses.

@47. At 2:50pm on 22 Feb 2011, blefuscu wrote:

"Well, Obama's Treasury Secretary, Tim Geithner has endorsed the Osborne policies as 'very good' and compliments the Coalition for adressing the deep deficit problem not caused by them but by, presumably the Brown/Balls Labour team."

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

Oh that's good. Last week he was condemning the strategy:

https://www.bbc.co.uk/news/business-12307906

Good old fashioned political blame games. Yawn....

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

"Thanks for reporting that as well as this faintly encouraging news about the fiscal outturn for January."

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

Read 19. At 1:11pm on 22 Feb 2011, GRIMUPNORTH77 wrote:

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

"PS Given that expenditure has risen since the Coalition took office, perhaps we should be told when the 'cuts' are actually happening!"

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

So...is that an admission of hypocrisy or are we dealing with something more serious?

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

"Over to you, Stephanie."

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

How quaintly patronising.

41. At 2:21pm on 22 Feb 2011, aka_bluepeter wrote:

"It's all to do with confidence."

Insanity grips Britain......you're confusing the Economy with Gok Wan's "how to look good naked" - which might be quite useful when you can't afford the cotton for your clothes anymore!

Ponzi schemes are 'all to do with confidence' - are you making a freudian slip?

In Stephanie's blog ,
88. At 01:44am on 21 Dec 2010, onward-ho wrote:
2011 UK public finances sharp improvement.

55. At 3:40pm on 22 Feb 2011, jon_griffey

Spot on. In order for all the wealthy shareholders to get their money out at 40% and not 50%, they had to declare dividends and, to declare the dividends they had to have sufficient profits. Little surprise in the increase in Corporation tax receipts. Ditto Capital Gains I should think.

Persistently high and rising unemployment. Higher inflation and now an increased tax take, coupled with a fall in public borrowing/spending.

Ooh, ooh (waving hand in the air) I know the answer - fiscal drag...At least that's what my old economics textbook says it is. As a bright spark has already pointed out here, the increased tax take has the same effect on the economy as lower public spending: it reduces demand and has a negative effect on growth. It's why fiscal drag also masquerades as the 'automatic stabilizer' because it reduces the strength of ups and downs in the economy.

However, given government fiscal policy regarding taxation and public spending, it's quite likely that there is not much of an 'automatic' element to this stabilizer-cum-fiscal drag. In addition, as inflation puts people in higher tax brackets there is, if you will, a double drag to this particular fiscal drag.

According to my textbook there are two ways to tackle fiscal drag, and I quote, "either by cutting taxes or increasing spending...(which) are enough to bring joy to a politician's heart." (Wonnacott and Wonnacott). Hmmmm, not much chance of that hapening here, then. Mind you, as other contributors have alluded to here, one has to consider lags - no, not the sort Ken Clarke is accused of going soft on, lags as in delays to the economic effects of changes in taxation, investment, public spending, consumer demand and so on - so it might be a little rash to jump to conclusions over one set of figures.

54. At 3:40pm on 22 Feb 2011, davidbrent wrote:

"The oil price is going to stabilise. I know that because the US have issued a request for OPEC to increase production in response to the likely disruption to Libyan and other supplies. So everything's going to be just fine."

That would be nice - here's a counter view on that.
https://www.businessinsider.com/spare-capacity-theory-2011-2

M"ind you, that is the only statement I've heard from the US on Libya since before the weekend, despite Gaddafi's henchmen using anti-aircraft missiles against crowds of protesters (as reported on this website) and mercenaries being used to assault women and children (also reported on this website). Whereas they couldn't resist giving their two cents regarding Egypt even though the worst atrocity there was a cavalry charge by a herd of camels (though I'm sure that was no picnic either). Perhaps it's because foreign cameras aren't allowed in Libya - if you can't see it on Fox News then it can't be happening is the attitude I guess. "

...just like the angry Lybian exile on the TV last night "where is the condemnation from the west on these attrocities....you've treated us like an oil well for all these years and now you won't help the people whose freedoms you claim to be your concern"

This comes back to the argument I had yesterday - we've had our 'luxury lifestyle' in the west subsidised.....subsidised by the pain of the people of the middle east...now that susidy has run out and the tables are turning.
Why do you think Cameron was 'in like Flynn' yesterday?

It's all about the black stuff.

I'm hoping the newly liberated countries of Tunisia and Egypt will now step in and support the people of Lybia - Gaddaffi is finished I'm afraid it's now just a question of how loyal his loyal elite forces really are.

...on to Yemen...

I imagine that some of the BOE's £200 billion of QE was bound to make it back into the tax coffers eventually - so that would probably account for this blippy 'healthy' economic indicator.

60. At 3:56pm on 22 Feb 2011, onward-ho wrote:

"In Stephanie's blog ,
88. At 01:44am on 21 Dec 2010, onward-ho wrote:
2011 UK public finances sharp improvement."

You need more sleep - and 4 days before christmas too??

Early to bed, early to rise, makes a man healthy, wealthy and wise.

Big deal!

I have a surplus every now and then, it's called pay day. The rest of the time, well, oh dear, deficit, deficit!

I'm afraid that's all it is guys and gals - pay day.

Classic headline..

https://fullcomment.nationalpost.com/2011/02/22/george-jonas-writing-on-the-wall-for-gaddafi/

Many have expressed reason why the tax take his higher and all are plausable so why is SF so ligh weight in the analysis.

This one of the many reason why we are in this mess as reporters like SF have been so light weight when analysisng the data etc. I support what GO is trying to do BUT even he will need to be taken to account at time by SF, pitty is this was not done with GB over the last 14 years. What a pity

62. At 4:14pm on 22 Feb 2011, BJK

A brilliant reminder of our school days.....good old fiscal drag....unfortunately all you have proven today is that you know more about Economics than the chancellor.

So no gold star I'm afraid - but maybe you can explain the other 'text book' concept we have seen for the first time in our lives (well most of us) - the good old beast of stagflation.

Yes, you boy, at the back three rows in...

Do you all remember how that 'problem with american mortgages' was cited as the cause of the crisis - but we were all assured it had gone away?

....well guess again folks - that's a real double dip.

https://www.businessinsider.com/chart-of-the-day-december-case-shiller-2011-2

I hear a million homeowners are expecting reposession in the US this year - these are not sub-prime people, these are primes.....or maybe we're all sub-prime now...

The government is reducing spending, with incomes contracting in real terms the general public is reducing spending - if any business has true acumen they would be hell bent on reducing spending. Taken together it is in effect a cost cutting triple whammy. One wonders if every single sector in society is reducing spending then how is growth a real possiblity - other than more QE based economic steroids from the BOE to make our economy look like a viable runner? Any figures that suggest growth should be viewed with great suspicion as the terms of its possibility don't really add up.

"Britain should seek to retain a "healthy slice" of the defence market in the Middle East, Defence Secretary Liam Fox said today. "

Defence from who?

Is this democracy 'western style' - at the barrel of a gun?

Have our politicians no shame?

If this is the cost of recovery - then I'd rather stay in depression thanks.

https://www.independent.co.uk/news/uk/politics/liam-fox-defends-mideast-arms-sales-2222027.html

@54. At 3:40pm on 22 Feb 2011, davidbrent wrote:

If only it were true David. I have various friends and acquaintances, including a brother, previously or still in mining and have heard endless vignettes about various countries and their 'rulers', OPEC meetings (one friend was a hostess), minisubs, the oil industry.......including overzealous estimates of oil reserves - fiddling the figures has been suspected for many years, not just from recent reports such as:

https://www.liveoilprices.co.uk/oil/peak_oil/02/2011/saudi-oil-reserves-maybe-overstated-by-near-40-percent.html

https://www.upi.com/Science_News/Resource-Wars/2011/02/10/WikiLeaks-Saudi-oil-reserves-overstated/UPI-16841297339421/

I don't listen to OPEC and anyone who does should go to one of their meetings.

37. At 2:02pm on 22 Feb 2011, Chris Cox wrote:
So the real questions coming out of these figures are:
Assuming that borrowing for this year comes in below forecast how much extra money will George Osborne have to play in the next budget? – my guess is something in the region of £5-10bn.


===================

The answer is nothing : However it will be good news that we have less of a financial burden to pay the interest on that we might have had.

Minus 140 is still a very big minus figure just marginally smaller than minus 150 billion.

Take that 140 billion and work out the annual interest payable on this debt at between 4 and 5% the rate the government can borrow at.
You will find the answer is between 5.6 and 7 billion pounds spent per year for everymore until this money is repaid, will be spent supporting that borrowing. Imagine what you could do with that sort of money?
The worse that borrowing gets the worse the cuts that are needed to fund the debt interest.

So whilst it is good news - Osborne has no extra to play with - if he goes for a giveaway budget using the Ballsian fanatasy economics you propose then he can be regarded incompetent in the same fashion.

68. At 4:53pm on 22 Feb 2011, IR35_SURVIVOR wrote:

"I support what GO is trying to do BUT even he will need to be taken to account at time by SF, pitty is this was not done with GB over the last 14 years. What a pity"

You wouldn't have listened anyway - I mean NOBODY listens to ANYBODY during a BOOM. During booms all our problems are solved (apparently) - it's only when the BUST comes that most people suddenly take an interest.

Stephanie, there is nothing "peculiar" about Government Ministers not wanting to "talk up" a surplus of this kind. This Government is engaged upon one of the biggest rounds of spending cuts in modern history in a largely-politically motivated drive to shrink the state. This will involve pay-freezes and cuts for some of the lowest-paid people in this country, associated with benefit cuts intended to drive people into increasingly poorly-paid jobs.
To sell this to the British people they need a Big Scary Deficit to frighten us with. They need a way for them - and us - to wash their hands of any responsibility for the economic kicking that ordinary workers in this country get, while the wealthiest get ever wealthier. "We have no choice in the light of the Big Scary Deficit" will do just nicely.

@63. At 4:32pm on 22 Feb 2011, writingsonthewall wrote:

"I'm hoping the newly liberated countries of Tunisia and Egypt will now step in and support the people of Lybia - Gaddaffi is finished I'm afraid it's now just a question of how loyal his loyal elite forces really are."

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

I can't see it ending well.

Oh for goodness sake, Stephanie, we will be thinking you too have sold out to these Eton twerps.

Tax receipts in Jan don't tell you anything about the economy now or in future, in fact much of it relates to profits realised up to eighteen months ago!

What we should worry about is the economy NEXT Jan when the deflationary effect of the cuts STARTS to kick in.

Everyone serious knows it will hit employment hard, which is what actually matters.

Inflation will reduce the value of the deficit more than these stupidly reckless, doctrine inspired, cuts.

Start thinking like an Economist again.

Regarding my #54 - for the avoidance of doubt I was being sarcastic when stating everything will be fine simply because the US has requested increased oil production (sarcasm is difficult to get across in text, I really should stop trying).

Clearly we are not in a situation where global supplies can be turned on and off like a kitchen tap at the whim of the US consumer. And if things get even worse in the Middle East (no sign of it yet but what if the House of Saud is toppled?) then UK motorists will shortly be reminiscing nostalgically about how petrol was so cheap in 2010.

Democracy? - what democracy.

When the police remove you from a public council meeting by physical force - you know democracy has long gone.

[Unsuitable/Broken URL removed by Moderator]

Fortunately the revolution is unstoppable - don't think revolutions are merely for the middle east - up and down the country the people are fighting back against the ideological cuts.

https://london.indymedia.org/articles/7421

I do love Britain, it takes a while for it to get going, but once it does it's very difficult to stop.

The sleepers have awakened.

77. At 5:47pm on 22 Feb 2011, Duxtungstu wrote:

"I can't see it ending well."

Have faith - the power of the people will see them through. Clearly, just as in 1917 in St Petersburg - the military are none too keen on murdering their own people.

Why do you think the Lybian Army left the Egyptian border? - not under orders, they have gone home to protect their families.

I give Gadaffi until Friday - if he's not out by then, I may well have to go in and do the job myself!

If (or rather when) Gadaffi does go - watch all the other Arab nations catch on to the fact that if Gadaffi can fall - anyone can. Just like when East Germany fell in 1989 - it was a sign to the others.

....and like then, some regimes (like Ceauşescu's) were harder to break than others (like Czechoslovakia - the velvet revolution)...but they all broke eventually.

There is no turning back, the genie is out of the bottle.

81. At 6:08pm on 22 Feb 2011, writingsonthewall wrote:
"Have faith - the power of the people will see them through. Clearly, just as in 1917 in St Petersburg - the military are none too keen on murdering their own people."

Oh yes, that went well didn't it , how many of his own people did Stalin have butchered?

Timothy Geithner at Davos a few weeks' ago -

https://www.bbc.co.uk/news/business-12307906

Timothy Geithner as reported today -

https://www.bbc.co.uk/news/business-12531102

Sounds like a bit of a contradiction to me. Don't trust anybody who works in "Finance". They play games that cost other people all the time.

Aren't there any other UK Accountants on here who can repeat the Tax Year explanations like -

19. At 1:11pm on 22 Feb 2011, GRIMUPNORTH77 wrote:
33. At 1:52pm on 22 Feb 2011, Nick Platts wrote:

which, to my amateurish and lacking in economics mind, sound like logical reasons for the tax take increase?

The things that are presented as positive news!!! Maybe the increase in tax revenue is the sums collected from banks and banker bonuses. They seem to be doing well....everyone else...not so much. Looks like in a few generations the debt could become manageable, but in that time the bankers will have stolen again.

Given that Saudi Arabia is an absolute monarchy and that Kuwait is essentially a paper democracy run by an Emir who has the power to dismiss parliament and take absolute control of the country in an 'emergency' - then one has to wonder what David Cameron's speeches inciting the historical inevitablity of revolution in the region will be received in those regions?

I imagine he is now public enemy number one to the monarchic leaders of those countries. If DC succeeds in spreading unrest to Kuwait and SA then we could be looking at $300 per barrel at least in the next few months. Smart money gets into oil and gold now. Goldman Sachs say they see gold reaching $3000 in the near future and I agree with them (it could even stretch further if confidence in the dollar, long term bond and market meltdowns materialize in the US as expected).

'it is very odd to have the economy shrinking by 0.5% at the same time as tax revenues are coming in exactly as forecast - if not a little faster'

....................
The VAT increase ... higher prices and higher VAT on the higher prices ... which means ... higher inflation.
Simples

Giselle 83

Nothing contridictory in what he said on those 2 occasions. He made clear in the interview with Gavin Davies that the US position is different from that of the UK. In particular we are in a worse position than the US and indeed worse than any other G20 nation due to the shocking mismanagement of the economy by the Labour party.

Timothy Geithner supports the measures the coalition are taking because he believes they provide the best way to restore the country's finances and get the economy back on it's feet.

His comments put a lie to the already discredited claim that the cuts are ideologically motivated.

85. At 7:00pm on 22 Feb 2011, you wrote:

Sorry - Price Waterhouse for the gold price forecast not goldman sachs - the brains a fickle mistress when you're at the thin end of your forties and a few kronys the wiser.

WOTW 81

'Just like when East Germany fell in 1989 - it was a sign to the others.'

That would be the triumph of free market capitalism over socialism you are referring to there I believe. Good to see that this has since spread even further to countries such as China and India who are beginning to reap the benefits of abandonning socialist ideology.

. At 6:34pm on 22 Feb 2011, Giselle wrote:
Timothy Geithner at Davos a few weeks' ago -
https://www.bbc.co.uk/news/business-12307906
Timothy Geithner as reported today -
https://www.bbc.co.uk/news/business-12531102
Sounds like a bit of a contradiction to me. Don't trust anybody who works in "Finance". They play games that cost other people all the time.

It is contradictory,spending in the US,cuts here,until you remember that financial secretaries have a diplomatic as well as an economic role.He is equivalent to Mr.Osborne,must not be seen to be critical of UK economic policy,especially with the state visit in May.

Giselle 83

'which, to my amateurish and lacking in economics mind, sound like logical reasons for the tax take increase?'

Indeed, and a £150bn deficit sounds like a pretty logical reason for cutting spending, hence Timothy Geithners support for the measures the coalition are taking. If you're into thinking logically then perhaps you could begin to support these measures yourself.

87. At 7:19pm on 22 Feb 2011, jobsagoodin wrote:
Giselle 83

"Nothing contridictory in what he said on those 2 occasions. He made clear in the interview with Gavin Davies that the US position is different from that of the UK. In particular we are in a worse position than the US and indeed worse than any other G20 nation due to the shocking mismanagement of the economy by the Labour party.
Timothy Geithner supports the measures the coalition are taking because he believes they provide the best way to restore the country's finances and get the economy back on it's feet.

His comments put a lie to the already discredited claim that the cuts are ideologically motivated.

The US budget deficit of 10.6% of GDP is similar to the UKs 11.6%.State spending in the UK is a bit over 40% of GDP,so is America`s.The difference at the moment is the USA is continuing with its fiscal stimulus and achieving a growth rate of 3.6% annually,the UK growth rate slipped back in the last quarter and after revision is unlikely to be positive.

Why Mr.Geithner thinks deficitis is OK for the UK but not the US is more to do with low politics than economics.His main argument seems to be the higher growth rates in the US,but this is because America rejected the policies he is advocating for us.

At Davos came out against the policy of rapid cuts when growth is fragile,a man of contradictions.

@79. At 5:56pm on 22 Feb 2011, davidbrent wrote:

Sorry David! That's twice in a week. I'm making a habit of it. Must be my shrinking frontal lobes.

@81. At 6:08pm on 22 Feb 2011, writingsonthewall wrote:
77. At 5:47pm on 22 Feb 2011, Duxtungstu wrote:

"I can't see it ending well."

"Have faith - the power of the people will see them through. Clearly, just as in 1917 in St Petersburg - the military are none too keen on murdering their own people."

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

I expect Gaddafi will be usurped (he's lost overall control) but he doesn't have anywhere to go. And neither does his 'elite guard' who must know they will be on the receiving end now they've killed so many of their own people. Hopefully it will end without more bloodshed. But perhaps it will not.

"It just gets worse". That's my view on standard of life in this country. Deficit has to be dealt with one way or another. If increasing government spending is the answer then why are we in this mess when all we've had under labour is increases in spending? It's just such basic logic that you can't keeping running up debts indefinitely without going bankrupt.

My understanding is debt is growth borrowed from the future. We are now in that future and there is no growth to be had. We have to suffer now for the "good times" we had. Although my good times were back in the late nineties and ever since the year 2000 have got progressively poorer. Maybe because I don't see equity in property as real money and have refused to go on a debt binge.

So my prediction for the next decade is Pain. As a country we deserve it for falling for the new labour project lies. (Blair, Brown and Mandelson). It was all about keeping power for them, nothing else.

#94 Duxtungstu. Sadly there is no perhaps about it. The blood money men in London and Washington are terrified of the contagion hitting that bastion of freedom overseen by the fun loving wahabbists of Saudi Arabia.

The killing clowns have been given free rein.

#89. At 7:25pm on 22 Feb 2011, jobsagoodin wrote:
WOTW 81

'Just like when East Germany fell in 1989 - it was a sign to the others.'

That would be the triumph of free market capitalism over socialism you are referring to there I believe. Good to see that this has since spread even further to countries such as China and India who are beginning to reap the benefits of abandonning socialist ideology.

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

You have to be socialist in the first place to abandon it. None of the Soviet Bloc, Soviet satellite states or China are, or were, socialist. Now India is an intersting one, why have you suggested they're abandoning socialism, this I'm very curious about considering India is the largest democracy on earth and has never embraced socialism, quite the opposite in fact. I'd like to know how you've arrived at this statement.

#87. At 7:19pm on 22 Feb 2011, jobsagoodin wrote:
Giselle 83

Nothing contridictory in what he said on those 2 occasions. He made clear in the interview with Gavin Davies that the US position is different from that of the UK. In particular we are in a worse position than the US and indeed worse than any other G20 nation due to the shocking mismanagement of the economy by the Labour party.
------------------------------------------------------------------

Yaaawwwwn!!

Nothing to do with sixty years of successive governments running up deficits and debasing our manufacturing industry during the 1980's then, 'tis all Labours fault. Also, our position is very similar to the US, we're both up s**t creek.

#95. At 8:47pm on 22 Feb 2011, MagnusGreel wrote:
"It just gets worse". That's my view on standard of life in this country. Deficit has to be dealt with one way or another. If increasing government spending is the answer then why are we in this mess when all we've had under labour is increases in spending? It's just such basic logic that you can't keeping running up debts indefinitely without going bankrupt.

My understanding is debt is growth borrowed from the future. We are now in that future and there is no growth to be had. We have to suffer now for the "good times" we had. Although my good times were back in the late nineties and ever since the year 2000 have got progressively poorer. Maybe because I don't see equity in property as real money and have refused to go on a debt binge.

So my prediction for the next decade is Pain. As a country we deserve it for falling for the new labour project lies. (Blair, Brown and Mandelson). It was all about keeping power for them, nothing else.

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

Sorry you really have fallen for it haven't you.

For the umpteenth time, recurring deficit is part of the capitalist model, you can sustain indefinite deficits - that's indefinite - providing the rate of increase in deficit does not exceed the rate of growth over a determined period. The boom appears because growth accelerates due to financial policy laxity and the bust arrives because the financial laxity promotes risk taking. Both laxity and risk are controlled by the beneficiaries so the bloke in the street pays for the risk and bizarrely also pays for the laxity in the form of debt. He's conned into accepting it by believing he must to pay for the good times; why do you accept it?

It's the system that's bust but they're trying to convince you otherwise, sovereign deficit isn't a credit card, it is a rolling capitalist growth subsription. No deficit, no growth. Also no relaxed policy and elimination of risk would virtually eliminate boom and bust, so I ask again why do you accept it. This is nothing to do with Labour alone but all governments relaxing policy and regulations under presssure from banks allowing increased risk. Again I say the system is bust, capitalism is in its death throws, either that or we all are.

#89 jobsagoodin. The collapse of the USSR and the "freeing" of its satellite states had the handy side effect of opening up access to vast swathes of cheap labor and new markets into which junk food and junk bond purveyors could penetrate.

Since the fall of communism something like 30% of the Bulgarian population have left Bulgaria. Pray tell how does this benefit Bulgaria, and exactly which economies were being held back through lack of access to Bulgarian labor?

This time around the despotic regimes under threat are, almost without exception, Western placemen.

Bearing that in mind do you think that there might likely be a somewhat more bloody outcome?

Who do you think might do well in an election in Saudi Arabia? Yes that's right Iranian supported shia groups in the bit where all the oil is and Bin Laden and his mates in the bit with sand but no oil.

A lot of people are about to reap the benefit of free market capitalism through the muzzle of a gun. If that don't work you will reap the benefit through $300/bbl oil prices, and of course all the extra tax to fund an exponential growth in counter terrorism measures. Yeh hah, let's all give it up(or give up other peoples lives) for free market capitalism.