Thursday, 22 March 2012

EXCLUSIVE: Man in shower gets wet

1. In the year to 31 March 2012 public expenditure is estimated to be £710 billion. According to yesterday's Budget, Whitehall expects to spend £683 billion over the next year, a tiny reduction of 2.4% in nominal terms, very slightly more in real terms, taking RPI inflation into account.

Gordon Brown was always very good at hiding expenditure, behind PFIs and peculiar corporate structures like Network Rail – we have to hope that £683 billion doesn't omit any expenditure that is known about but not being declared.

2. Of that public expenditure, £50 billion in 2011-12 was interest on the national debt and that figure is expected to fall a respectable 8% to £46 billion in 2012-13.

If our credit rating falls and interest rates rise, the good news will evaporate. If interest rates double, then £46 billion becomes £92 billion, an 84% increase on 2011-12.

3. The Exchequer was expecting to collect £589 billion of revenue in 2011-12 and expects £592 billion in 2012-13, a tiny increase of 0.51%, which is good, but better would be to see a significant decrease. Individuals and companies are less likely to waste their money than Whitehall.

The attention being paid to tax avoidance could have some surprising victims – that great scourge of tax avoidance, the Guardian, relies for income on its Cayman Islands joint venture with Apax Partners and if they have to start paying the tax they owe – if the GAAR is pointed at them – then the newspaper could go out of business in one year instead of three.

4. In 2011-12, the nation borrowed an estimated £121 billion to keep itself in the manner to which it has become accustomed. The deficit in 2012-13 is expected to fall to £91 billion, a tidy reduction of 24.2%. Do we really have to wait five more years for a balanced budget?

With the economy flat and the national debt little short of £1 trillion – yesterday's figure was £985 billion – the media still manage to sound surprised that people are worse off. How do they do it? Which maths lesson did they miss at school? Addition? Subtraction? Were they asleep throughout the Autumn of 2008?

Just to remind them, Gordon Brown had to fly off from the 2008 Labour Party conference to "save the world", or at least the UK, from the mess he and Ed Balls and Sir Gus now Lord O'Donnell had created. There was a problem then and there still is. Wishful thinking hasn't made it go away.

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