This page has been archived and commenting is disabled.
Osborne Seems to Have Read the BoomBustBlog UK Financial Analysis, His U.K. Deficit Cuts May Rattle His Coalition But He Has Little Choice
In the British chapter of our tome on the Pan-European Sovereign Debt
Crisis, things are going according to plan. Subscribers should refer to
UK Public Finances March 2010) then reference Bloomberg: Osborne’s U.K. Deficit Cuts May Rattle Coalition
June 22 (Bloomberg) — U.K. Chancellor
of the Exchequer George
Osborne’s plans to cut spending by the most since the 1980s in an
emergency budget today may test the durability of the six-week old
coalition and the strength of union opposition. The prospect of an
increase in value-added tax may lead some Liberal Democrat lawmakers to
rebel against the Conservative led-coalition, as unions oppose steps to
cut jobs, public workers’ pay and welfare. The spending reductions and
tax increases also risk tipping the economy back into recession.
…
The austerity plan will set the size
of the budget while leaving details of cuts until Osborne maps out
departmental plans in the fall. Fitch Ratings said June 8 the U.K. needs
to speed deficit cuts to guard its top credit rating. The U.K.’s Office
of Budget Responsibility last week estimated debt would rise to 74
percent of GDP in 2015 from 62 percent in the current year. The deficit
will be 10.5 percent of GDP this year. “It’s going to be bad everywhere,
and the removal of public demand could be nasty” said Shamik Dhar, an
economist at Aviva Plc, which has 262 billion euros ($323 billion) under
management. “I don’t think the structural deficit is going to be as
bad, and interest rates at near zero are going to help.” The pound
declined against the dollar and gilts advanced as some investors
anticipated the spending cuts would prompt the Bank of England to
maintain its record-low benchmark interest rate of 0.5 percent.
…
Some economists and opposition
parties say current government forecasts of 2.6
percent growth in 2011 and 2.8 percent in 2012 may be scaled back as
Osborne’s measures suck resources out of the economy. As he battled to
stave off defeat during this year’s election campaign, Labour Prime
Minister Gordon
Brown said immediate spending cuts sought by Conservatives risked a
double-dip recession. Alistair
Darling, Osborne’s Labour Party predecessor, said Osborne is
overplaying the risk of a sovereign debt crisis to shrink the size of
the state. Darling yesterday told reporters in London yesterday that he
would be “astonished’ if Osborne holds back from increasing VAT to 20
percent from 17.5
…
To cushion the impact of spending
cuts, Osborne will propose raising the ceiling at which the lowest rate
of income tax is levied by 1,000 pounds to 7,475 pounds, exempting
880,000 low earners from payment, said a person with knowledge of the
plans. He’ll also seek to maintain spending on schools, hospital
buildings and other infrastructure projects. Part of the effort to sell
the austerity measures to voters will include a levy on banks’ assets or
liabilities that will raise at least 2 billion pounds a year, according
to three people with knowledge of the plans. Osborne told the British
Broadcasting Corp. June 20 that he’ll press ahead with plans to increase
capital-gains tax to prevent rich people from declaring earned income,
which is subject to as much as 50 percent tax, as a capital gain that is
liable to an 18 percent tax.
…
Of the U.K.’s current 704
billion-pound annual budget, more than a quarter, or 196 billion pounds,
is targeted for ‘‘social protection” measures, including welfare and
pensions. Total public-sector pay totals about 160 billion pounds a
year. Osborne said in his BBC interview that the welfare budget is “out
of control” and that it discourages people from working because they can
rely on state handouts. The effort to trim the deficit will also focus
on the public-sector workforce, Osborne said. He told the BBC that many
of Britain’s 6.1 million employees face a wage freeze extending beyond
this year. The last Labour government added 900,000 workers to the state
payroll during its 13 years in power, more than a third of them in the
past two years to help counter the recession. The government now
accounts for one in five jobs in Britain.
I’d like to take this time to share page 4 of our subscription-based
analysis of the UK’s predicament (
UK Public Finances March 2010)…
You see, things are materially worse than Britain is letting on. Now,
if we were to reverse the exaggerations, optimistic assumptions and
outright lies (speaking of which, reference Lies, Damn Lies, and Sovereign Truths: Why the Euro is
Destined to Collapse!)…
… and in terms of government balance over-optimism???
Those interest in our higher end analysis can access our subscription services by registering here.
- advertisements -
I Love gucci and chanel. Some women do not mind buying replica handbags, while some women just love designer handbags if you can distinguish between good and bed from the replica handbag?you also can use low price get high quality enjoy?today use chanel handbag ?tomorrow carry gucci handbag?the day after tomorrow hermes handbad in your hand? this niceness all give the credit to low price?same argument you also can buyreplica watches?buy DVDs louis vuitton...
yawn!!!!! it is futile to think in terms of "austerity" or "double dip". These expressions are descriptive of a required change.
People involved in a debate or who are responsible for setting any budget should stick to what can be afforded, not how it will be described by sycophantics.
Fact, you can't expect to borrow money that you don't have.
Fact, you pay higher interest in absolute terms the more you borrow.
Fact, if you print money you defer the problem (at best) or money has less value (inflation).
Fact, the UK needs to run budget surpluses to reduce debt and improve its fiscal position.
Fact, running budget deficits, increases debt.
Fact, the UK is still running massive deficits for the next five years.
Ok those are the facts. In my house, if I take a pay cut or I splurge and have to repay debt, I work out a plan to repay my debt.
One final fact.
The UK is increasing its debt by not taking sufficient taxes to pay for the demands of its citizens who choose not to pay tax.
Make no bone about it, living beyond your means (call it deliberate government policy to promote non-tax payers at the expense of tax payers) means you are going broke. The UK is still going broke. Its not even going broke at a slow rate. All we are left to do is figure out whether this failed nation state is going broke at a faster or slower rate than other failed nation states and whether we can afford to pay for additional police to make sure the fewer and fewer remaining tax payers dont stop paying their increasing share of taxes.
Cut spending by 30% for five years. Then we will have a solution to this failure to be an independent nation, by ending deficits and repaying debt.
Osborne doesn't give a sh*t about the boombustblog.
Mr. Reggie,
still waiting and waiting. sorry but I finished your six pack of beer...would b gr8 to join your team...would appreciate your reply...
Austerity measures won't work, the system (imperial fiat debt based monetary...with bailouts) is done.
Welfare is not the symptom, nor the cause, it is the effects of the underlying crap. If this brings it down, then the system was broken to begin with.
Only people with LIMITED thinking will promote these austerity measures.
Why is it limited? Simple.
You are ASSUMING the only way to go forward, is the continuation of the crap imperial fiat debt based monetary system...with bailouts.
America, and hell U.K., can switch away from the busted, broken, fucked up system, and switch to the American Credit system, or something along those lines.
We can implement Glass/Steagall and wipe out all the bullshit that is crushing the real economy.
Or we can just pretend these real things aren't there, and call for austerity measures that STILL WON'T WORK. Cut everything, the system will STILL crash.
Things ARE worst then expected, but the way out isn't paying off this bs debt, but wiping out through a reenacted Glass/Steagall all the ficticious debts that don't MEET the Glass/Steagall standard.
Or we can save all the crap, for a little while...or not, and implement needless, yes NEEDLESS austerity measures.
It seems the U.K. has already decided, not surprisingly, it's their crap system they are trying to save.
We don't have to hold onto THEIR crap system. Nor match their needless austerity measures. We also don't have to have limited thinking, in which we must save the status quo, when we can change overnight and start going forward.
If we don't we'll just continue to go backwards.
It's really looking like the next few weeks are really going to be exciting, looks like everybody is about to go 2 years back, and probably in due time, much more.
jimc888 +100
A. "We're going to balance our budget by slashing spending and creating a deep recession. It shouldn't impact our tax revenues."
B. "Due to the unexpected decline in tax revenues, the budget deficit will be larger than originally forecast before the austerity measures. So those were half-measures, and now we are really going to cut to balance the budget, putting ourselves in a depression. It shouldn't impact our tax revenues."
C. "Due to the unexpected decline in tax revenues, the budget deficit will be larger than we forecast before the second cut in spending. Indeed, it will be larger than before the first cut in spending. So there is no choice but to undergo a third set of cuts that will reduce previously untouchable parts of the budget, like the Queen's allowance."
D. "My government has decided to resign due to the rioting in the streets. However, as my last official act I am permanently suspending Parliment, and turning the reins of government over to the Queen. We expect the restoration of the monarchy to also restore Great Britian to its rightful place in the world. Democracy didn't work, because your elected officials were always under pressure to spend money to benefit private interests and voters, while refraining from taxing those same private interests and voters to pay the bill. God save Great Britian, and God save the Queen."
Until there is a major dismantling of welfare dependancy in the UK this is all tinkering around the edges,the UK is now a shell of an economy with a vast proportion of its population dependant on the state either directly in the form of benefits or indirectly in that they actually work for the state in some form or other(Brown added a million non jobs in this sector alone in his tenure).This reliance on the state is growing as more and more real jobs are lost and people either end up on the dole or working for the state, real measures to tackle the above would produce civil unrest, so will obviously be avoided.
The UK government will then resort to the same tactics employed since WW1 and devalue the pound and print money to appease the masses.There never has been any real political will to tackle the difficult issues the UK faces,this time the decision has to be made against the backdrop of the looming world depression,there isn't a hope in hell the Tory/Lib Dem fudge will have the backbone to do the right thing.
Moody's Says UK Emergency Budget Supportive Of AAA Rating, Sends GBP, EUR Higher ( ?!?!?!? )
http://www.zerohedge.com/article/moodys-says-uk-emergency-budget-supportive-aaa-rating-send-gbp-eur-higher
Everyone on ZH, listen to part 1:
http://www.cbc.ca/asithappens/
Right after the scientist bit, listen to the discussion on British austerity measures and how they will bring about double-dip recession at best!
I think we worked out the debt to be something like £31k per person per year. How do you get yourself out of that mess.
Calculation is that the UK debt is £890bn. (I think the 1.1 trillion referred to is US$). So £890bn between 23 million productive workers equals £38k person.
The annual UK budget is £671bn. This works out at £29k a person. This is every year.
If you say the UK is going to take 20 years to repay the debt, then this is £1.9k a year per person.
Add £29k + £1.9k and you have say £31k per person per year.
"How do you get yourself out of that mess."
Tax the rich? :)