In a nutshell: we have a £5bn tax cut right now. A boom, Then a £5bn tax rise.
Massive deficits in the coming three years of half a trillion pounds. BUT even those rely on a remarkable boom in 2011. Look at the chart below to get an idea of the likely size of the deficit in comparison to those since the Second World War (click to see a larger version):
Source: IFS, updated by Channel 4 News to include projections from today’s budget.
National debt is set to peak at 79 per cent of GDP. Only last year the budget assumed a “ceiling” of 40 per cent on national debt that had been kept to for a decade. That is totally obliterated in a year.
Page 38 of the Red Book says current spending will grow by an average of 0.7 per cent a year between
2011-12 and 2013-14 in real terms. So far under the Labour the growth rate has been 3.2 per cent.
That means that the chancellor is planning public spending growth lower than in the Thatcher era.
So what happens if the Great Boom of 2011 doesn’t happen? Do the public finances unravel? Or is that the problem of George Osborne?
I’d love to know what’s going on in George Osborne’s head. On the one hand he could hope to be a shoo-in for Number 11 in the next 11 months. But the chancellor has effectively tied his hands for most of a likely Conservative first term.
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A budget for the poor? There’s bound to be lots of debate about that but by keeping its promises on international aid the UK government is doing a better job than most to help the world’s poorest people. Oxfam has been campaigning on this and has put together a summary of what today’s announcements will mean for poor people around the world: http://www.oxfam.org.uk/campaigns
Am I incorrect in understanding that this blog is for posts by Jon and not the entire Channel4 News team?
Now that Faisal has his own blog, what’s the justification for posting this to Jon’s?
Shouldn’t a blog attributed to an individual contain posts by (or at least, introduced by) that person?
This is Faisal Islam’s blog, which focuses on economic matters. Jon Snow’s blogs can be found here at Snowblog. And the World News Blog contains posts from our international correspondents around the globe.
You can navigate to the blogs from the Channel 4 News homepage via the link to “Blogs” in the left-hand menu. Then select one of the three blogs and you’ll see all the most recent posts by either Jon Snow, Faisal Islam or the World News bloggers.
You can also use the links in the left-hand menu on this page to navigate between the blogs – just click where it says Snowblog, World News Blog, or Economics Blog.
We value your feedback, and I hope this is helpful.
For years the economy has been based around debt. Not just personal debt — PFIs have been used to build hospitals, schools and housing and the cost must all be paid back in the future with interest on top. Whereas many students used to get education for free, now they face large debts for years ahead. Homeowners have huge mortgages and the housing market will never go back to what it was, as banks won’t lend the same way, so there will be fewer buy-to-let owners and first-time-buyers. Hence negative equity for many for a decade or longer until prices increase to the traditional 3.5x average earnings.
The country already faced a time bomb in terms of public service pensions and an ageing population.
It’s human nature not to want to be the one who pays more and this feeble government didn’t want to make anyone pay. So borrowing was used instead — by the government and individuals were encouraged to get into debt in every way possible.
When I was a child my not-very-well-off parents could afford a house with just my dad working. Look at the situation now. Are we really any better off?
I think the country faces economic catastrophe. The money has all flown. Well done if you made a fortune on property or as a highly rewarded trader or executive. Our children are going to be paying for all of this for the next 60 years.
Hello Mr Islam,
Thank you for your report on the budget tonight. When there’s a big economic story going down I always try and see your interpretation of events – calm & clear, unlike your peers on the other channels.
Thanks again.
you mentioned that to repay the borrowed money we would be paying 42billlion a year in interest. who are we repaying? why cant that interest on the borrowed money be frozen or reduced to allow the total to be paid off quicker?
Jody, Gilts (government bonds) are a form of loan from anyone who will lend the UK the money. They do that in return for an interest rate as a bank does when it lends for mortgages. The interest rate is pre agreed. We can’t stop paying it as that would be a “default” and we would have to repay all the loan instantly or never be lent money again. The 42 billion a year is the burden the government policies have put on future generations and it may be much more than 42 billion.
After the Autumn statement, I commented that I didn’t believe the projected deficits then mooted by Darling.
Usual response from Politicians (or the rebuttal unit), if they respond to such comments, is something along the lines of “that’s cynical”.
It is better to be cynical and questioning than naively optimistic and living in cloud cuckoo land…
That’s essentially how the Bankers, Politicians and Regulators managed to rack up this debt crisis in the first place,
they were naively optimistic.
Politicians assumed Bankers were trustworthy (they’re not), Bankers trusted AAA ratings (they’re worthless) and Regulators assumed that light touch was appropriate (it wasn’t)…
I would also like to say that Faisal’s reporting on the economy is the only one I really trust. He is succint and seems non partisan- more than can be said for many others.
[...] As I’ve said before, the carnage inflicted the public finances are of an order associated with a world war, and I cannot imagine a better subject for parliamentarians to investigate than how we have got into this mess. [...]
Faisal: True statement regarding the opening statement in the blog.
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