Budget in a nutshell

[TheOldhamWhisper]

Beer up 4p a pint
Wine 14p a bottle
Spirits 55p a bottle
Cider 3p a litre

All from Sunday (so get really hammered this weekend - it might be your last chance!).

Cigs up 11p a packet

Pensioners get an extra £50 a year (£100 for over 80s) - they should use it for fuel but they might just be reckless and blow it on half a bitter down the local.

Schools to get £200 million to make exams easier (how else will
EVERY school become an improving one by 2011??).

[Onlyforfun]

Current Account deficit increases AGAIN.

Borrowing increases AGAIN.

Northern Rock and PFI excluded from liabilities AGAIN.

[Win2Win]

Beer up 4p a pint
Wine 14p a bottle
Spirits 55p a bottle
Cider 3p a litre

That'll certainly get rid of drunken teenagers and alcoholics If the government really wanted to do something they'd slap all alcohol with a £20 tax .......may as well screw the majority who are doing nothing wrong....they usually do anyway.

[buddhabee]

Who does the Government actually 'borrow' from? Is it just hypothetical money from an account with The Bank of England? Or money from other countries?

[GlosRFC]

A number of places. It borrows money from the private sector through the issue of Treasury Bonds, i.e. guarantees to repay the amount borrowed plus interest after x years. These are usually long term, 10, 20, 50 years or more.

They also borrow money from private individuals in the same way. Premium Bonds, Savings Certificates, etc are all guarantees underwritten by Government to repay the amount "borrowed" (i.e. the amount the saver has invested) plus interest. These are usually shorter term, 1 to 5 years, although the interest payable varies in order to discourage the saver from cashing them in early.

They borrow from public companies by issuing bonds in exchange for the profits. For example, the profits made by the Post Office are used to purchase Treasury Bonds. If the Post Office want more money to invest in the business, they have to get Government (as the shareholder) to agree that they can resell the Bonds.

Government can't lose because, when Bonds become payable, they can simply raise taxes to cover the amount they have to repay, issue more long-term bonds to cover the shortfall, reduce the amount they spend, or print more money!

They can also borrow from other countries - for example we borrowed money from the US to help pay for the costs of WWII which we've only just finished paying back. They can also borrow from the World Bank.

According to Keynes, borrowing should occur during times of recession so that it can be paid back through increased taxes in the boom years. That's why Brown repaid debt in his first few budgets instead of making tax cuts.

[GlosRFC]

On the subject of the Budget though, it's interesting how we sleep-walked into an Orwellian Big Brother society because of irrational concerns about crime, the incompetence of politicians in believing that technology (speed camera's, CCTV, ID cards) held all the answers, and the greed of Treasury mandarins in recognising the opportunity of gaining a fast buck through stealth taxation (speed camera's, ID cards).

Now we're sleep-walking into a period of environmental concern through an irrational (and scientifically ungrounded) fear of climate change, the incompetence of politicians in believing that the environmental lobbyists hold all the answers, and the greed of Treasury mandarins in recognising the opportunity of gaining a fast buck through stealth taxation (plastic bag surcharges, gas-guzzling vehicles, etc).

Nothing ever changes...or at least, the incompetence of politicians and the greed of the Treasury doesn't.

[Jonny2621]

The trouble is that Brown let spending run amok, much of it seemingly lost in various public sector black holes, never to be seen again. He relied on a strong economy and tax receipts, as well as North Sea oil revenues and a rising housing market to fund all the spending. Public sector borrowing is at an unsustainable level, especially as we are now on the brink of recession. Its unsustainable even without the debts of Northern Rock and the thousands of PFI projects, the liabilities of which the govt hides 'off balance sheet'

As tax receipts fall, which they will do given the dire state of the economy, this unrestrained spending will HAVE to be reined in. Then of course, cutting back public spending during a recession doesnt exactly help the economy to recover.

Basically Darling was given a poison chalice by Brown and has been left to carry the can for Brown's bad policies. He has no room to raise taxes as they are already way higher than our nearest competitors, particulalry corporate taxes. He needs to cut spending drastically as the govt is skint but he cant.

During the good years Brown spent everything, or should that be wasted, and didnt put anything in the govt's coffers for a rainy day. PRUDENT my ass....

Bet he was well chuffed when Brown offered him this job.

[GlosRFC]

What makes you suppose that spending has to be reined in during a recession? According to Keynes, saving for a rainy day actually encourages a recession or even a depression. The theory goes that saving naturally implies that you're not spending all of your income. Therefore it means that there's an insufficient demand for business output, i.e. products. Businesses therefore have an accumulation of unsold goods and materials which encourages them to decrease both production and employment. This in turn lowers people's incomes and the level that they can save. If the saving levels don't fall significantly enough, then there's more build-up of unsold goods, less production, more unemployment, and less income...so a downward spiral into a recession occurs.

Most economists will tell you that it's better to borrow when the economy is dire because a) people will generally be happy with investment in public infrastuctures, b) this investment creates jobs and thus more income and c) interest repayment rates are lower.
The time to repay the loans are when the economy is booming because a) people don't mind higher tax rates, b) more tax decreases spendable income and therefore reduces excessive saving, and c) money is available to repay loans earlier.

[TheOldhamWhisper]

Of course they could just do what most Labour governments have done in the past when facing bugetary problems - lose a general election and blame it all on the Tories

[Win2Win]

Well one of the governments policies is to get people to use more enviromentally friendly vehicles, although I would imagine that is more to do with the price of oil, than anything they have done.

I'm replacing my vehicle later this year, and was looking at a 4x4 with 42mpg, but I now reckon diesel will hit £1.50/ltr within 3/4 years, so now I'm including MPV's in the equation. Again though, this is the price of oil, not the governments 'green' policies.

The problem with all this is, that people in our village have no PO/Shop now as it was closed down, and we really need 4x4 type vehicles around here. Most people are just moving to the nearest town now, so we've had 2 houses empty in the village for some time now. Good old government policies, think only of the cities, sod the rural areas.

[Onlyforfun]

Government can't lose because, when Bonds become payable, they can simply raise taxes to cover the amount they have to repay, issue more long-term bonds to cover the shortfall, reduce the amount they spend, or print more money!

You'v ehit the nail on the head. That's what got us into the current inflationary mess (more the US than us, but we have gone along with it).

What makes you suppose that spending has to be reined in during a recession? According to Keynes, saving for a rainy day actually encourages a recession or even a depression. The theory goes that saving naturally implies that you're not spending all of your income. Therefore it means that there's an insufficient demand for business output, i.e. products. Businesses therefore have an accumulation of unsold goods and materials which encourages them to decrease both production and employment. This in turn lowers people's incomes and the level that they can save. If the saving levels don't fall significantly enough, then there's more build-up of unsold goods, less production, more unemployment, and less income...so a downward spiral into a recession occurs.

Most economists will tell you that it's better to borrow when the economy is dire because a) people will generally be happy with investment in public infrastuctures, b) this investment creates jobs and thus more income and c) interest repayment rates are lower.
The time to repay the loans are when the economy is booming because a) people don't mind higher tax rates, b) more tax decreases spendable income and therefore reduces excessive saving, and c) money is available to repay loans earlier.

Keynes was a fool, as are most academic economists, their models ususlly sound so rational but fail to take account of human nature.

But even if that is not the case, the current government has not "invested" except by its own definition. Increasing the size of the puiblic sector and wages / pension liabilities within such is not investment in a form that any businessman would understand. Not to mention, it is very inflationary, as increases in productivity or output do not match, never mind exceed, the amount spent as government of any form is a destroyer of wealth rather than a creator.

Using some of those billions to build a new nuclear power infrastructure or to increase R&D on alternative power would have been a better use of funds as it would create jobs and a skilled technical base. I don't really believe the global warming (or should I say climate change) arguments and certainly don't believe we can do much about it even if it's true but as long as everyone else does there is money to be made by being a centre of excellence. Mind you, not teaching basic skills like maths and science is hardly conducive to producing a nation of skilled engineers.

The same problem is seen in the US where infrastructure is literally collapsing and the cost of it's indigenous industries raw materials are rising due to environmental antipathy towards mining (the US now imports many raw materials, including oil, that it used to be self-sufficient in, including many rare and strategically important metals and minerals that the Chinese now control the supply of).

By spending trillion of dollars on Iraq / Afghanistan, Federal reserve intervention (whatever happened to good old capitalism) in the markets and now taxpayer rebates instead of improving the above mentioned, an inflationary spiral is the result.

[Win2Win]

Concerning 'wastage', going through the jobs in New Scientist, the government jobs are always £10,000 a year more than the equivalent in the private sector. Then they get a decent pension with it, and other bits.