The latest public sector finances statistics from the ONS show that in July the public sector had a current budget deficit of £5.1bn and net borrowing of £8bn. At the end of July net debt was £800.8bn or 56.8% of GDP.
The public sector current deficit is £13bn higher than last year when there was a surplus of £7.8bn and the net borrowing is £13.2bn higher than last year when the public sector was lending net of £5.2bn. Latest figures for net debt without financial sector intervention are for June when net debt was £658.1 or 46.6% of GDP. Whereas last year the public sector made a repayment of £14.5bn the net cash requirement for July this year was £0.2bn an increase of £14.7bn. Comparing the net debt shows that last year the net debt was 43.5% of GDP at £627.2bn.
Government receipts were 15.3% lower than the same month last year and government spending was 7.5% higher. Net investment was £2.9bn compared with £2.6bn last year. The Institute of Fiscal Studies said that receipts of Corporation Tax and VAT collapsed to two-thirds of their July 2008 level more than the Treasury predicted in the Budget over the year. Spending is increasing as predicted. They also add that there are good reasons to expect a better performance in revenues over the next few months. The reversal of the VAT cut scheduled for the end of 2009 is one of them.
Showing posts with label Treasury. Show all posts
Showing posts with label Treasury. Show all posts
Thursday, 27 August 2009
Wednesday, 22 July 2009
Debt Highest Proportion Of GDP Yet
The public sector current deficit was £9.9bn in June 2009 according to the Public Sector Finances bulletin from the Office for National Statistics and HM Treasury. Public sector net borrowing was £13bn. The net cash requirement was £19bn and the net debt £798.8bn or 56.6% GDP. The public sector net debt for June was £657.5bn. In the year 2009/10 April to June there was a current budget deficit of £34.1bn and net borrowing of £41.2bn. The public sector net cash requirement was £42.8bn. The Budget 2009 predicted public sector current budget of £132bn, public sector net borrowing of £175bn and public sector debt excluding financial sector interventions of 55.4% GDP at end March 2010. Financial sector interventions have had some effect on financial data. It has reduced the Central Government Net Cash Requirement (CGNCR) by about £2.5bn, mainly due to the disposal of company securities, but was neutral for the public sector as a whole.
The Institute for Fiscal Studies said the public finance figures may give some encouragement to the Government as tax receipts fell by only 5.7% in June relative to June last year. It is a smaller rate of decline than the 7.4% predicted for the whole of 2009/10. The figures may at first suggest slower spending growth but in fact without the financial sector intervention it can be seen that spending continues to grow. Fears about the use of public sector investment not being able to stimulate the economy quickly enough have not so far been borne out as investment has been £2.6bn higher than the same period last year.
The Institute for Fiscal Studies said the public finance figures may give some encouragement to the Government as tax receipts fell by only 5.7% in June relative to June last year. It is a smaller rate of decline than the 7.4% predicted for the whole of 2009/10. The figures may at first suggest slower spending growth but in fact without the financial sector intervention it can be seen that spending continues to grow. Fears about the use of public sector investment not being able to stimulate the economy quickly enough have not so far been borne out as investment has been £2.6bn higher than the same period last year.
Wednesday, 18 February 2009
Noah's Ark
The Government is steering the ship. It has instruments of control to direct the economy in a particular direction. The most important instruments include public spending and taxation decisions to alter the course of the economy. Economic indicators tell us how well a policy is working. Budgetary instruments of control are used to vary the amount of public spending to increase or depress economic activity and to target its spending to try to influence groups or areas.
Earlier administrations have denied that government could control the economy in this way. The most they could do, they said, was create the right free market conditions and competition would do the rest. Governments still do try to steer the economy. It tries to control inflation as all post-war governments have done. The recent recession and government financial support for the banks show that free markets are far from perfect and government intervention is occasionally necessary (Jones et al. 1998).
At the centre of the machine are the Treasury and the Bank of England. There is considerable argument about the extent of their power but they have an important ongoing role in daily strategy and tactics in fiscal and monetary policy (Jones et al. 1998). The Chancellor of the Exchequer has initiated several policy actions in recent months to help cope with the credit crisis, stabilize the economy, control inflation and control unemployment. Macroeconomic objectives also include long-term sustainable economic growth. The Governor of the Bank of England has also used its policy tools to carry out its functions and achieve its objectives (Parkin, Powell and Matthews, 1997).
Recessions begin when investment slows down. If investment is maintained at a modest rate, capital stock grows slowly and the law of diminishing returns works in reverse. Real business cycle theory takes changes in investment demand and demand for labour into consideration. People can decide when to work and how much but must use the real interest rate. If the quantity of money changes, aggregate demand changes. The 'dismal science' says that however much investment and technological change occurs real wage rates are always being pushed back down to subsistence levels. It is the theory on which classical population growth economics is based. The classical growth theory is likewise based on the view that population growth is determined by income levels. Modern growth theories turn the classical theory on its head.
According to the modern growth theory founded by Joseph Schumpeter new technologies are the source of economic progress. In capitalist society it creates turmoil, a process of 'creative destruction' creating new businesses and destroying currently profitable businesses. Rising incomes slow population growth because they increase the opportunity cost of having children. Growth occurs because the technological advancement and productivity growth prospects are unlimited.
Miscalculations of inflation may give an inaccurate measurement of real GDP growth. They probably give a fairly accurate estimation of the phase of the business cycle. Other indicators, such as jobs, correlate. Real GDP figures can overstate the situation because in a recession household production and leisure time are countercyclical and tend to increase. They also tend to understate to long-term growth rate. Impulses will come from future expectations of sales and profits on one hand and an increase in money supply on the other. An unanticipated change in aggregate demand due to fiscal or monetary policy may also bring a change in real GDP (Parkin, Powell and Matthews, 1997). The banks must get things moving again. Economic policy is made up in the process of execution and relies on private bodies like banks. The economy cannot work without banks circulating notes and coins, processing cheques and acting as financial intermediaries to businesses (Jones et al, 1998).
Earlier administrations have denied that government could control the economy in this way. The most they could do, they said, was create the right free market conditions and competition would do the rest. Governments still do try to steer the economy. It tries to control inflation as all post-war governments have done. The recent recession and government financial support for the banks show that free markets are far from perfect and government intervention is occasionally necessary (Jones et al. 1998).
At the centre of the machine are the Treasury and the Bank of England. There is considerable argument about the extent of their power but they have an important ongoing role in daily strategy and tactics in fiscal and monetary policy (Jones et al. 1998). The Chancellor of the Exchequer has initiated several policy actions in recent months to help cope with the credit crisis, stabilize the economy, control inflation and control unemployment. Macroeconomic objectives also include long-term sustainable economic growth. The Governor of the Bank of England has also used its policy tools to carry out its functions and achieve its objectives (Parkin, Powell and Matthews, 1997).
Recessions begin when investment slows down. If investment is maintained at a modest rate, capital stock grows slowly and the law of diminishing returns works in reverse. Real business cycle theory takes changes in investment demand and demand for labour into consideration. People can decide when to work and how much but must use the real interest rate. If the quantity of money changes, aggregate demand changes. The 'dismal science' says that however much investment and technological change occurs real wage rates are always being pushed back down to subsistence levels. It is the theory on which classical population growth economics is based. The classical growth theory is likewise based on the view that population growth is determined by income levels. Modern growth theories turn the classical theory on its head.
According to the modern growth theory founded by Joseph Schumpeter new technologies are the source of economic progress. In capitalist society it creates turmoil, a process of 'creative destruction' creating new businesses and destroying currently profitable businesses. Rising incomes slow population growth because they increase the opportunity cost of having children. Growth occurs because the technological advancement and productivity growth prospects are unlimited.
Miscalculations of inflation may give an inaccurate measurement of real GDP growth. They probably give a fairly accurate estimation of the phase of the business cycle. Other indicators, such as jobs, correlate. Real GDP figures can overstate the situation because in a recession household production and leisure time are countercyclical and tend to increase. They also tend to understate to long-term growth rate. Impulses will come from future expectations of sales and profits on one hand and an increase in money supply on the other. An unanticipated change in aggregate demand due to fiscal or monetary policy may also bring a change in real GDP (Parkin, Powell and Matthews, 1997). The banks must get things moving again. Economic policy is made up in the process of execution and relies on private bodies like banks. The economy cannot work without banks circulating notes and coins, processing cheques and acting as financial intermediaries to businesses (Jones et al, 1998).
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