Thursday, June 18, 2009

OMG! The UK fiscal deficit

This chart is for anyone harbouring illusions about the current UK fiscal position. It illustrates the cumulative deficit for the first five months of this year and compares it to 2007 and 2008.

Normally, the UK government expects to run up a surplus during the first half of the year. Revenues are normally higher than expenditures. During the second half, things turn around, such that by the end of the year, the government has run up a significant deficit. In 2007, the five month surplus was ₤7.5 billion, while in 2008, it was a little over ₤5 billion.

In 2009, the fiscal position is a nightmare. So far this year, the UK government has run up a deficit of ₤31 billion. That works about at a daily deficit of $223 million.

14 comments:

  1. This is a Labour Government yet you still sound surprised!

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  2. Dr James Gordon BrownJune 18, 2009 at 10:10 AM

    You are wrong. I am perfect.

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  3. This can't possibly work right? The math I mean. With tax receipts plunging and spending rising, how can this be financed? Who's dumb enough to buy the debt? Or the the pound?

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  4. Brown has tried every trick in the book to re-ignite the housing bubble - mega low interest rates, writing off debt etc...
    These are the actions of a deperate man trying to paper over the cracks before a general election - someone who is trying to create an illusion of prosperity but in reality sinking the UK further into debt.
    Brown is like a gambler at the roulette wheel who is down to his last few quid... hoping that the next spins of the wheel will bring an end to his problems.
    So far he has slowed the pace of the house price crash (at the expense of savers and our children's future), but when interest rates go up and the money runs out, it will be carnage and only then will we see big price drops...

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  5. I hope people mark down the names of those who continue to play the housing bubble game: they need to be taught in the schools and put in the history books. Maybe something like the Doomsday Book, only a book of all the scum bags who broke Britain with their greed and short termism. It could read like this: A - Kirstie Alsop, B - Sarah Beenie, C - Yvette Cooper...

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  6. Alice, very decent of you to use white for the colour of the UK deficit. Some people might want to print out your chart and ink is expensive.

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  7. OMG! Indeed.

    And the one-eyed evil snot goblin says that he's going to increase spending in real terms.

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  8. Folks, exchange your hard-earned Brit pounds for some more stable currency, like Euros, or buy gold.

    The code word is 'Weimar'. You'll remember when it comes to it.

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  9. Britain is bankrupt. We are effectively a larger version of Northern Rock. Though in a worse state. Because we've borrowed money, spent it rather than loaned it out, and can only repay it if some other mug will lend us some more dosh. If the money markets turn against us, as they did to NR in 2007, we are screwed. Not only is our current spending budget in massive deficit, but we still have to pay back the capital each year on maturing debt we borrowed years ago.

    When the only way you can continue is to borrow more, to pay off your creditors, it's only a matter of time before the axe falls.

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  10. Should Switzerland build a few refugee camps for all these UK refugees that will doubtlessly flee their homeland when things go tits-up?

    Already, the rich and quite a few companies went there, or to Ireland, but Ireland is in the deficit vise as well...

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  11. mousseman,

    Not sure about gold. It will come down eventually when the sentiment changes. The Euro zone is not so greatly better managed than the UK, so Euros are a risk too.

    Best just pray. Or leave the country.

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  12. sobers: "Britain is bankrupt. We are effectively a larger version of Northern Rock. Though in a worse state."

    Northern Rock! How about Iceland?

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  13. But you can't grow, eat or drive gold!

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  14. Gold is a problem: look at history: if things get really bad (like the Depression) governments actually snatch the gold back. No joke. They did this in the Depression: just said you have to hand it in or go to jail. When governments go broke, they get predatory: they look for any tax they can, they drive you out of your house, they grab gold, they impose exchange controls, they devalue wealth with inflation or hyperinflation. The real issue is this: it is political and it is about control. The state must always be in control. When a government gets ropey (like New Labour) the more it gets aggressively controlling.

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