The Great Debate UK
Chancellor George Osborne has weathered criticism of his economic policies from both sides of the political isle in recent months, so it was no surprise that the buzz word from his Conservative Party Conference speech was “difficult”. Life at Westminster is difficult for Osborne at the moment and it’s unlikely to get any easier.
The problem for the Chancellor is that he has staked his credibility on bringing down the UK’s deficit, yet he is also trying to be a pioneer of growth and jobs. In the current environment neither goal looks achievable.
Public sector net borrowing has failed to slow in any sustainable way. Since January borrowing has been on average GBP6.6 billion per month. But that disguises the fluctuations throughout the year, which brought the total to more than GBP60 billion by August. This makes the government’s target to cut borrowing by GBP20 billion to GBP120 billion this fiscal year difficult to achieve.
The Office for Budget Responsibility (the independent verifier of the government’s fiscal plans) forecasts public sector net borrowing to fall to 7.9 percent of GDP in the current fiscal year, down from 9.9 percent in 2010/11. By 2015-16 borrowing is expected to fall to 1.5 percent of GDP, but at the current pace targets such as these seem utterly detached from reality. Either more spending cuts come into play in the coming months or the government misses its 2011/ 2012 forecasts. At this stage the latter seems most likely. For a country that is meant to be on a path to fiscal consolidation, slippage at this early stage of budget restraint suggests the ship has blown dramatically off course.
By Dr Gerard Lyons
This was a good budget in difficult times. Trouble is, just how difficult the times are is still not fully appreciated. The economic environment the Chancellor inherited was not good. The recent economic performance has not been good. And there is no reason to think it will get better anytime soon. Indeed the scale of fiscal tightening previously announced will probably weaken growth further in the near-term. The UK economy faces a long, hard slog.
Today’s budget provided some clarity about what type of economy the Chancellor hopes to see in the future. And there the message was well directed. One of Britain’s biggest problems has been its lack of strategic thinking. It still has some way to go on this to compete with China, Germany and many other economies. The budget outlined four areas the government wants to focus on, all of which made sense:
By Bobby Lane, Partner at Shelley Stock Hutter LLP. The opinions expressed are his own.
Everyone in my practice, and no doubt anyone advising the five million UK small and medium-sized enterprises (SMEs), welcomed the Prime Minister’s latest show of support for them at the recent Conservative Party conference.
By Thomas Story, Tax Director, BDO LLP. The opinions expressed are his own.
George Osborne has promised that measures to boost sustainable growth will be central to this week’s Budget. To meet this objective, the Chancellor faces the challenge of accelerating the reform of business taxation within the severe constraints imposed by the overall fiscal position and the political imperatives of the coalition government.
Many previous reforming Chancellors have benefited from a more benign fiscal outlook to facilitate fundamental fiscal reform (Nigel Lawson and Gordon Brown spring to mind). The daunting fiscal deficit means that any tax reforms must be achieved within a tax neutral framework; Geoffrey Howe’s Budgets in the early 1980s are a closer precedent but the need to accommodate both parties to the coalition agreement provides additional dilemmas in 2011.
-Julia Whittle is head of International at Punter Southall Financial Management. The opinions expressed are her own. Join Reuters for a live discussion with guests as UK Chancellor George Osborne makes an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-
It is highly unlikely previous Capital Gains Tax proposals will be reversed in Chancellor George Osborne’s first budget.
We will bring you full coverage of Osborne’s speech, including a live video feed and blog, after which we will conduct a short social media interview with him.
At 1:30pm British time on Wednesday, October 21, Reuters is hosting an exclusive Web 2.0 interview with Darling and we want you to send us your questions to put to the top man from the Treasury.
– Mark Hannam is a guest columnist, the views expressed are his own. He formerly worked at the Bank of England. He currently chairs Fair Finance, a microfinance company. The views expressed are his own. –
George Osborne’s proposals to reform the UK’s system of financial regulation make for good short-term politics but bad long-term policy. He should think again.
- Alf Vanags is director of the Baltic International Centre for Economic Policy Studies. The opinions expressed are his own. -
On April 28, 1925 the then Chancellor of the Exchequer, Winston Churchill, put Britain back on the gold standard at the pre-World War I parity, a move that was strongly criticized by Maynard Keynes in his pamphlet “The Economic Consequences of Mr. Churchill”.
The Bank of England tells us that their 75 billion pound quantitative easing programme will start the banks lending again (despite the banks saying that they are already lending, this is not strictly true). The programme works by the Bank buying securities from the banks and then this money can be loaned to consumers. The question is, does and will this work? Is 75 billion pounds enough?