Those of us rich in maturity and experience will recall what Gordon Brown’s basic spending plans were. Other than just splash the cash on the public sector that is. The basic idea was that the country should run a balanced budget over the business cycle – something whose length he continually redefined but still – excepting public sector investment. It’s not the budgetary stance we’d choose but it has a certain amount of intellectual and economic logic to it at least.
That does mean running a budget surplus – aside from the capital investment bit – at the peak of the economic cycle. And we’re at full employment, we’ve got growth, we aren’t, absolutely aren’t, in the depths of some terrible recession at present. We probably should therefore be paying our own way on that current spending therefore, tax revenues covering spending:
Britain is now running a current budget surplus as tax revenues cover all day to day spending, for the first full year since 2001.
This surplus, which excludes capital investment by the Government, came in at £3.8bn for 2017, the Office for National Statistics said.
George Osborne set this as a target in 2010 and hoped to achieve it two years earlier in 2015.
And isn’t everyone in the Labour Party (in this instance, the dividing line is probably about halfway through the Tory party actually) bitching about this? You know, that the Tories are following Gordon Brown’s own Golden Rule?
This is also hugely amusing:
The International Monetary Fund said Britain set an example for other countries to follow in slashing the deficit by cutting public spending, rather than raising taxes.
“Following the financial crisis, the two countries that adopted spending-based austerity and did better than the rest of the sample were Ireland and the UK,” the IMF report said.
“The result: growth in the United Kingdom was higher than the European average.”
It is increasingly important that other countries copy this approach, the IMF said, as Governments around the world have racked up too much debt which will harm growth and stifle productivity when interest rates rise.
Yes, the IMF really is saying that expansionary fiscal austerity is both a thing and it works. We wouldn’t recommend that you hold your breath for people to catch up with this idea.
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The average Labour supporter probably views our Cycloptic colleague as a right wing stooge nowadays.
The same people complaining about this are also calling for a 'Sovereign Wealth Fund'. Indeed they think Mrs Thatcher should have established one with North Sea Oil, as Norway did (with much higher revenues, a much smaller population and far higher taxes).
Where do they think the money would come from for a UK Sovereign Wealth Fund if a large & permanent deficit in public spending is not only expected, but welcomed?
Norway actually has lower taxes than the UK. I lived there for 20 years and my average tax was 31.73% of gross, in the UK over that time my income tax would have been 36.42% on the same income.
The standard VAT rate in Norway is 25%, and the government takes around 45% of GDP (as opposed to, I believe, around 42% in the UK)
“Thatcher should have established a Sovereign Wealth Fund…” Everyone seems to forget where we were back then: one step away from the poor house. North Sea Oil kept the bailiffs at arm’s length ’til we got back on our feet. There was nothing left for a savings bank.
We were also a significantly larger economy than Norway's and so ran far less risk of adverse effects due to the income from North Sea Oil. If Norway hadn't kept all of that income invested offshore then it definitely would have ended up with Dutch disease.
North Sea oil didn't run out when Thatcher left.
Jack Hughes calls it. Nobody--including the useless state --can put (very) large sums in a piggy bank while simultaneously borrowing a fortune because they can't live within their means to begin with. And a society poisoned by endless wasteful, bungling socialist nationalised money pits certainly won't have any spare cash. They can print or borrow for "savings" but that won't work out so well.
Government (as I confess I have learned from Our Tim) is extraordinarily bad at spending money. It tips as much as it can into bottomless pits and black holes. Thus to encourage growth, an expansionary budget is the last thing wanted. Cut spending and taxes to give more cash to the private sector. If a business does not turn a pound spent into at least a pound earned, it will not survive.
It seems every politician on the planet believes that the broken window fallacy is no such thing.