Coffee House

Austerity latest: spending up, deficit up.

22 January 2013

We can all overdo it a little at Christmas, but the government’s monthly overdraft statement — which came in this morning — is of a different order. In December, HM Treasury spent £15.4 billion more than it received in tax, a worse result than December last year where the monthly deficit was £14.8 billion. And why? Well, growth has been sluggish (we may learn on Friday that the UK economy is shrinking again) so tax revenues have fallen. But, more worryingly, state spending seems to be running out of control too. The below graph, from Citi, sums it up. The blue is what is expected (from those fiscal Mystic Megs at the Office for Budget Responsibility) for 2012-13 and the pink is what we have seen in the first nine months of that period.
CoffeeHousers will notice that the last four bars show spending up, not down. A funny kind of sado-austerity. While spending is up quite strongly, the tax haul is up by a pathetic 0.3 per cent, a far cry from the expected (and already-downgraded) 1.4 per cent. None of this makes it more likely that the UK government will hold on to its AAA credit rating which is still, supposedly, an explicit government promise. From now on, I suspect neither David Cameron nor George Osborne will talk about this rating as being very important.

No.10 said that Cameron ‘believes the economy is healing’ — his line, in public, is that he is ‘dealing with the debt’. Such language, of course, means only 10pc of the public realise that the debt is rising. The below graph shows what has happened since the election – the debt closed last year at £1,111 billion.

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Show comments
  • cyllan2

    it is really sick a tory gov still spends more and the unions labour and media call them butcheres of public services……..but that is the power of our obnoxious BBC and GUARDIAN plus all those in the quangos , shame on the tories for trying to be liberal….we pay the price….

  • Oli Burgess

    Of course the debt is rising, until there’s a budget surplus it always will be.

  • dalai guevara

    Public sector net debt is just over £1trillion, of 69% of annual GDP.
    Financial institutions debt alone is three and a half times that amount.

    Why should that be my problem?

    • the viceroy’s gin

      You keep asking that stupid question, but the answer hasn’t changed any. When the politicos inflate away the public debt, the induced inflation rate doesn’t discriminate between public and private debt, or wages or savings, or nothing. It destroys the value of all.

      Oh, and as also previously mentioned, the public debt to GDP ratio is 92%. Maybe you should write that down.

      • dalai guevara

        92% is the percentage of what? It’s £1,111bn, Fraser has just given you the figure!

        If you were right, our GDP would have fallen from £1,500bn to £1,200bn? When did that happen?

        PS we know inflation destroys your pension. Who said it wouldn’t? Financial institutions debt is three and a half times larger than any gov debt. Get over it. But no, you won’t…so I will have to regulate the gambling arms of banks for you, for the benefit and sake of those still left with a brain.

        • the viceroy’s gin

          92% is the percentage of exactly what I typed into that post, which isn’t whatever you or the Speccie teenager are blathering about.

          Read that post and answer your own question.

          • dalai guevara

            It’s not 92% (your figure is HOUSEHOLD debt, you cretin). It’s 69% of GDP. Basta. Learn the difference (you were given the chance before), and stop disturbing the grown ups.


            • the viceroy’s gin

              No, my figure is exactly what I posted. Read that post again and answer your own question.

              You are using inferior sources, and I don’t think you understand exactly what you’re talking about, as usual.

              Because afterall, you’re stupid.

              • dalai guevara

                You have posted nothing. No sources. Just bull excrement.
                If you wish to add financial interventions, then say so.
                If you wish to add PFI debt, then say so.
                If you wish to add some form of future public sector pension commitment, then say so.

                As you are not saying so (as you would be making up your own little reality), the total of £1,111bn is not 92% of anything.

                Even if it was, ‘unregulated bankster debt’ would still be TWO AND A HALF TIMES larger than what you blow off about, which is -just face it- the essence of my original post.

                • the viceroy’s gin

                  Actually, I’m not “adding” anything. I’m calculating the figure as anybody who’s not stupid does. Maybe that’s why you’re having trouble here. And again, you don’t seem to understand what you’re talking about. Which shouldn’t be surprising to us… as afterall… you’re stupid.

                • Colonel Mustard

                  And you are just abusive – as usual.

                • the viceroy’s gin

                  …and you’re just whimpering, as usual.

  • last_brit_standing

    The Tories will lose the next election because they’re in an unenviable position where most people associate them with cuts and blame them for economic troubles, but actually they’re spending more than ever. People like Owen Jones seems to think that if you keep talking rubbish about Tory austerity it makes it true. Only people with no principle or creativity like Dave and George could come up with this. It just goes to show that intellect and intelligence aren’t all that’s needed.

  • stickywicket

    They seem to be getting all the opprobrium for being the Nasty Party of cuts, but in the end they are being even more profligate than Brown.

    Go figure!

    • HooksLaw

      None discretionary govt spending (structural) is being cut. Because of the recession the ‘stabilisers (part of cyclical spending) persist.
      That is not being ‘more profligate than Brown’

      The German economy contracted in the 4th quarter which gives an indication of the economic health of the world.
      As it is we have become Germany’s biggest trading partner. Our exports to Germany rose 20% in the first 3 quarters.

  • OldSlaughter

    What’s worst about this is that by sounding all Tory about stuff he has discredited a conservative approach even though he has barely tried one. John Redwood would have handled this differently and better, for example.

    • HooksLaw

      John Redwood would not have been elected.

      • Hexhamgeezer

        Yea, the Oracle hath spoken.

        Contradict ye not, for His Wrath, for His curses are Legion.

      • 2trueblue

        He was elected by his constituents. His passage forward has been down to the stupidity of those higher up in the party. He says it how it is, is very bright and articulate. Not an attribute know to gain popularity in any party. Shallow lot.

  • williamblakesghost

    And the Cameron’s blue doormats wonder why so many Conservatives are fleeing to other parties. Its not Europe, It’s not Immigration, It’s Not Gay Marriage (although none of those help), its that Osborne, whilst adopting the most cynical inflationary attempts to price our way out of our debt problems is just continuing the policy of government debt addiction started by Clarke in the mid 1990’s when real austerity is required. The problem with this government is its supposed economic policy is basically A LIE!

    • CaediteEos

      Too right. The real mystery is why Cameron still claims to implementing austerity. It allows haters like UK Uncut and Polly Toynbee to castigate him with “savage cuts gnawing at the bone of the poor”-type rhetoric, pulling voters to the left, while any electoral gains he could have had on the right are wiped out by the fact that no actual cuts are being made. All in all – hello Labour in 2015. I can’t wait…

  • doggywoggy

    Where is the austerity that the left and the BBC are always screaming about? Oh yes, thanks to the TENS OF BILLIONS that labour borrowed from future tax payers, at interest to the banks, in order to keep bankers bonuses flowing in 2008-2010, (whilst doubling the income tax of the poorest workers), the interest is piling up year on year and forcing debt ever higher. The only solution, or natural consequence of labour’s gross over-spending to prop up failed and corrupt banks, is massive austerity. I see the tories appear to be trying to hang on to the scale of the debt long enough to drop this massive pile of labour created debt back onto the labour party in 2015. The problem with that strategy is, labour will lie and blame ALL the debt on the tories. The sad part is that labour supporters are so economically ignorant, that they will allow labour to get away with it.

  • Tom Tom

    They have no method of control. They have destroyed Savers with QE and collapsed housing transactions so reducing tax revenues. Most private sector employees are on pay freeze/cuts. The only people i know who are still spending work in the professional public sector seemingly oblivious to the squeeze felt by most people. They have more disposable income from reduced mortgages and guaranteed jobs. The Socialisation of the British Economy is accelerating under Osborne as taxes rise and spending increases. There is simply no prospect of the train wreck being avoided as we speed through every station and jump every set of points

    • cyllan2


  • Its_not_craig

    Go on.

    Someone blame Labour.

    • williamblakesghost

      Well Labour carried on government debt addiction in the most careless and irresponsible manner for almost 10 years. Whatever Osborne’s failings are and they are several it will never change the underlying fact that Labour whilst in government spent like drunken alcoholics in a brewery and Ed Miliband and Ed Balls were amongst the SPADS who were responsible for it.

      Not to mention it was Milibands disgraceful energy/ climate change policies that this government has most disasterously implemented…..

      • Its_not_craig


        The “underlying facts” allows us to claim that our lot (The Tories) are failing catastrophically and therefore we can sink our head in the sands and ignore that we once believed Gideon was the answer.

        The only answer he’s provided us is to the question “Who can carry on Gordon Brown’s economic strategy”?

        Well done us!

    • Colonel Mustard

      I blame Labour. They got us into this mess. They inspired the current PM to meld big state socialism with predatory corporatism so people get ripped off twice.

      • Its_not_craig

        Beautiful answer.

        No argument from me on the Beast that Blair spawned in the shape of Cameron.

        • Hexhamgeezer

          ‘The Blair Spawn’ has a certain ring to it.

        • Dimoto

          Nothing to do with Brown-Balls then ?

    • HJ777

      It’s not all Labour’s fault but they did leave a record deficit.

      During the credit boom that preceded the early 90s recession, the Tory government used booming (albeit unsustainable) tax revenues to run a surplus of around 2% of GDP. Thus, the deficit rose from this base figure.

      During the even bigger credit boom that preceded the recent crash, the Labour government had been running a deficit of over 3% of GDP despite booming (and similarly unsustainable) tax revenues. Had it been running a surplus of 2% of GDP like its Tory predecessor, our deficit would now be 5% of GDP lower than it is, because of the more favourable starting point.

      • Its_not_craig

        Hey, no argument on facts.

        But to draw the argument back to 1990’s Tories begs the question:

        If booming tax revenues were always unsustainable; then surely the modern day deficit is Thatcher’s fault, no?

        BTW – I don’t actually believe this but use to draw attention to the mindless denial of the problems Osborne is creating in the economy – irrespective of Labour’s time in office or not.

        I want a Tory majority – and Osborne is leading us to another generational period in opposition.

        • HJ777

          Not at all. Booming tax revenues created by an unsustainable credit boom are also unsustainable. Once the credit boom is over, you get a more realistic view of the true long term situation when it comes to tax revenues.

          By the time Labour came to power, tax revenues had increased substantially again due to real (i.e. not artificially credit-fuelled) growth in the economy, to the extent that the deficit was fast disappearing and debt was actually falling as a percentage of GDP.

          • HooksLaw

            And Brown should have managed government policy from within a properly controlled budget. He did not and spending went up without the taxes to sustain it. Its no easy job to turn off the spending tap, both practically and politically. Every body want cuts but not today dear lord, and not to me.

            The govt are cutting spending and, unlike labours claims, are trying to do so without throwing the baby out with the bath water.

            Meantime Mr Nelsons graph has suspicious looking %ages marked on the left. Of what?
            In fact its ‘YoY Growth of Central Government Receipts and Spending’ – so central govt receipts are not as catastrophically down as the histogram might suggest. CITI suggest a revenue undershoot of 1%.
            Its a sly deceit that sadly I am becoming used to.

  • Nick Reid

    Well, as the likes of Polly Toynbee are always pointing out “80% of the cuts are yet to happen” and she is right. So far, apart from some sizeable job losses in parts of the public sector, all the cuts announced so far are just that “announcements”. They won’t actually start being implemented until later this year.

    How this fits in with the Left’s “too far, too fast” mantra I don’t know but it does partly explain why government borrowing has yet to start falling.

    • HooksLaw

      Government borrowing has fallen

  • Justathought

    And it is usually around this time that Chancellors like to spend a little more to generate the feel good factor by the time of the elections. It seems to be less “sado-austerity” and more pseudo-austerity.

    Off-piste; The Minister of the largest unionist party in N.Ireland has announced that having held internal talks within the party and they are now going to support the Sinn Fein campaign for a referendum on a United Ireland. The idea is that a definite vote to stay in the UK will stabilise the political situation.

  • Magnolia

    A lot of governments everywhere have no money. They will get the money from those who already have it because, as every good Conservative knows, if you increase taxes then the tax take goes down, so they will debase the currency and print to infinity.
    It’s very sad because it will wipe out what little trust there is left down to absolute zero.
    Guard your vital(s) wealth or it will be stolen from you.

    • Ian Walker

      If you’re naïve enough to think that cash is wealth, then you deserve to lose it all.

      • Magnolia

        I never said that cash was wealth. Most wealth can be cashed and converted to the money that the government requires.

      • Tom Tom

        I cannot derive your conclusion from Magnolia’s text…….The Wealth Effect relies upon The Price Level

  • Olaf

    And still we borrow to give money away. Often to contries that neither want it or need it.

    • telemachus

      You are talking about the proportionately minuscule amounts that as an investment in our foreign relations will brig dividends in spades
      Why for example were we not investing in Mali?

  • LB

    Debt up?

    You mean borrowing up.

    The True debt is astronomical.

    What about pensions? ie. Just the part that people have paid for up front, or the part that civil servants have ‘earned’. It’s a debt. It’s not on the books.


    In summary, the estimates in the new supplementary table indicate a total Government pension obligation, at the end of December 2010, of £5.01 trillion, or 342 per cent of GDP, of which around £4.7 trillion relates to unfunded obligations


    That’s two years out of date. The current figure, just for the pensions, is 5,300 bn with no assets. It’s an unsecured debt.

    • HooksLaw

      Future pension payments are not debt.
      By your logic people living longer is adding to our debt. Equally the simple expedient of letting them die early lowers the debt.

      • LB

        Future pensions payouts, where the rights have been bought in the past, or where they form part of the pay for past work, are debts.

        GAAP and FRS17, the accounting standards are quite clear. They are liabilities or debts. Pick your word.

        Which accounting standards are you using to say they aren’t debts?


        By your logic people living longer is adding to our debt.


        If you apply the accounting rules properly, no. Increases in life expectancy are well known and have been going on at 1 in year in 10 (slightly higher since the 50s) since 1830. So your future cash flow calculations, will have this built in, or you aren’t accounting for your liabilities properly.

        Now if you introduce a shoot the aged, or the Liverpool Care Pathway if its in the NHS, then that would reduce the liabilities.

        So to reiterate the question, which accounting standard are you applying, or are you doing what the government say.

        It’s says, we’re going to use GAAP and FRS17. Ah, but we’re not because we don’t like the answer. If we used them, then people would be able to work out we’re not going to pay them a pension for their contributions.

        Heaven help us if they worked out what they could have got for the NI if they had invested the money. Then they really would lynch us.

  • 2trueblue

    A blanket figure is not enough, just the same as it would not be if it were my household. Where exactly has the upsurge occurred, and why? Are we looking at spending that will be ongoing, or are we looking at “one off” items, such as redundancy payments within the public sector/civil service? It would be better to have figures with more detail. It is impossible to judge what it all means. Paying down debt is always expensive, as is dealing with the consequences of being debt, i.e. borrowing to keep afloat.

    • Rjs2662

      Agree more detail required for proper analysis but the real problem is that we have not even started “paying down debt”. This was supposed to start in 2015 now said to be 2017 but if we continue to hover at 0% growth even this will not be achievable. By that time net debt will be around 85% of GDP. Time for a change of course?

      • HJ777

        Strictly speaking, we don’t need to pay off any debt in order to reduce the burden. If we can get to the point where the deficit (as a % of GDP) is less than the rise in GDP (also expressed as a percentage), then the debt will start falling as a percentage of GDP.

        This is one reason why so few governments have ever run a surplus – you can be fiscally responsible without needing to.

        I grant you that we are a long way off reducing debt as a percentage of GDP.

  • jazz6o6

    Time for some real cuts.

    • dalai guevara the unregulated arms of the financial sector.

      • jazz6o6

        It was the public sector aka FSA + BoE who were supposed to be regulating the banks and financial sector. And what a bang up job they did (not).

        • dalai guevara

          But all the king’s men on here don’t think that far. They’d rather sacrifice a pawn. Shameful unstatesmanlike behaviour.

          • the viceroy’s gin

            That post is so stupid it makes my hair hurt.

      • Tom Tom

        Yes it does make you wonder how Brown found so many Insiders to run this Quango ? Adair Turner, Callum McCarthy, Hector Sants…..Civil Servants with City careers……….even the Economist was queryinmg the competence 8 years ago today in 2005………….

        • dalai guevara

          Spare me with the quangos, or indeed the regulator – he has been renamed, has he not? Job done.


    • Mike Barnes

      Why? The cuts we’ve already had have induced a triple dip recession.

      If you want to see what ‘real cuts’ do for a country look at Greece. Slashing more than ever and their economy shrinks every quarter.

      • jazz6o6

        More public sector whining ?

      • HJ777

        Would you like to put some (verifiable) numbers about the supposed ‘cuts’ that have supposedly caused a triple-dip recession in order to back up your claim? I was under the impression that public spending has actually risen under this government (in real as well as cash terms).

        What we have undoubtedly seen is tax rises in order to reduce the deficit. Perhaps if we had had fewer tax rises and commensurate public spending cuts, the result would have been different.

        • DeadlyInArms

          I suggest you read how the IMF have recently admitted that their fiscal multipliers were wrong for their calculations of the effects of austerity – and the NIESR’s research that summarily showed that in all EU countries bar Ireland austerity had been self-defeating (i.e. debt to GDP ratio went up).

          The reason that public spending ends up going up is because automatic fiscal stabilisers have continued to kick in. They will not go down until economy is at or near full capacity. Whether or not that level of full capacity has been reduced is another matter.

          • HJ777

            I asked for numbers, not waffle.

            The idea that we first had ‘austerity’ and then public spending increased due to its supposed adverse effects, cannot be sustained by any reference to the facts. Public spending rose in real terms for the first two years of the current government during which time (and in the two years previously) a huge fiscal stimulus (financed by record deficits) was being applied. That fiscal stimulus – rather than ‘austerity’ – obviously failed.

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