Excellent clarity with just the right amount of snark, than you Ian. What I’m confused by is why the government needs to use taxpayer funds to subsidise winter fuel for pensioners. Can’t they just force the energy companies to set a lower tariff for the over 65s at source? Or cap it for everyone which would help keep inflation lower? The companies make massive profits and we pay to subsidise them!
This is a valuable aid to understanding what the hell is happening. Sadly things are as bad as I feared but at least I mostly understand it. Thank you.
Thanks Ian. Very helpful piece, because although I believe in them, it’s a bit hard to see the bigger picture without such explainers.
I just wish they had either held back with the WFP cuts until the budget, or announced a wider set of cuts early so that WFP wasn’t sat there like a malevolent festering mass for the Tories to whip up hate with. That seems like a bit of an own goal to me. It’s currently just sat there in isolation which hasn’t done them any good.
I know. But by making the announcement as a stand-alone it just gave their enemies fuel to build a screaming fire out of. Just saying there’s more to come hasn’t cut through.
The optics of it seem badly managed as far as damage limitation goes.
"The rule is that the government will have a rolling target for the current budget balance. It means that day-to-day costs must be met by revenue, rather than borrowing. This is like the cash you use to pay for the shopping rather than the deposit you put down for a house. It includes all sorts of things - welfare, services, salaries. But crucially, it does not include investment."
Speaking as a cabinet member for finance in local government, this is a rule that is rigorously enforced on local government. The only local governments that are allowed to finance revenue spending out of capital are those that are "bust", with the permission of central govt. It seems entirely sensible and reasonable, and I see no reason why it shouldn't be enforced on central government. Day to day spending needs to be paid for out of day to day income. Investment can be borrowed and paid back later.
(Not that I am criticising those local authorities that are going bust. Local govt finance is so screwed that some local councils are forced into doing this through absolutely no fault of their own.)
“ Fiddly bollocks”.. never was treasury policy so eloquently expressed. Thanks, Ian. This was just about within the limits of my understanding and to the point where I could actually learn something without my head falling off.
A good summary, thanks. Hopefully the current will-they-won't-they will get fixed in the budget, because industry has zero trust in the Treasury to deliver what it says it will do. And lack of trust costs money. Early decisions, stuck to and not fiddled with because of short term issues, are the only thing that will win that trust back and reduce costs.
And yet, we see HMT now looking again at the Transpennine Upgrade, a scheme I was working on over a decade ago and which still hasn't been delivered, to see how it can penny pinch. Plus ça change.
Great analysis. The only thing I'd add is that you can of course make a capital investment which reduces revenue spending. Fix that roof, save money on buckets.
Thanks Ian - good to get into the weeds of things.
Read an interesting piece on New Zealand and how they undertake their national bookkeeping to best reflect national wealth - an idea Ken Clarke toyed with in the early 90s but couldn’t find any traction for.
Great analysis. Fundamental problem imo is that Net Zero investments are no investments at all. They simply replace stable low cost energy with unstable high cost energy.
Borrowing money and increasing taxes to invest in unproductive assets with no tangible net benefit to the economy is simply an economic cost that ultimately, inevitably devalues the currency and leaves all citizens less well off.
(and considering that the whole basis for Net Zero remains hypothesis poorly supported by real evidence, making it a central pillar of policy is baffling and irrational.)
Excellent clarity with just the right amount of snark, than you Ian. What I’m confused by is why the government needs to use taxpayer funds to subsidise winter fuel for pensioners. Can’t they just force the energy companies to set a lower tariff for the over 65s at source? Or cap it for everyone which would help keep inflation lower? The companies make massive profits and we pay to subsidise them!
Price controls never work. More efficient to subsidise/top-up post-hoc imo
Rent?
This is a valuable aid to understanding what the hell is happening. Sadly things are as bad as I feared but at least I mostly understand it. Thank you.
Thanks Ian. Very helpful piece, because although I believe in them, it’s a bit hard to see the bigger picture without such explainers.
I just wish they had either held back with the WFP cuts until the budget, or announced a wider set of cuts early so that WFP wasn’t sat there like a malevolent festering mass for the Tories to whip up hate with. That seems like a bit of an own goal to me. It’s currently just sat there in isolation which hasn’t done them any good.
It would have been too late to announce WFP at the budget on 30tg Oct (letters normally start going out in Oct saying what your entitlement is).
I know. But by making the announcement as a stand-alone it just gave their enemies fuel to build a screaming fire out of. Just saying there’s more to come hasn’t cut through.
The optics of it seem badly managed as far as damage limitation goes.
Helpful and interesting, thank you
"The rule is that the government will have a rolling target for the current budget balance. It means that day-to-day costs must be met by revenue, rather than borrowing. This is like the cash you use to pay for the shopping rather than the deposit you put down for a house. It includes all sorts of things - welfare, services, salaries. But crucially, it does not include investment."
Speaking as a cabinet member for finance in local government, this is a rule that is rigorously enforced on local government. The only local governments that are allowed to finance revenue spending out of capital are those that are "bust", with the permission of central govt. It seems entirely sensible and reasonable, and I see no reason why it shouldn't be enforced on central government. Day to day spending needs to be paid for out of day to day income. Investment can be borrowed and paid back later.
(Not that I am criticising those local authorities that are going bust. Local govt finance is so screwed that some local councils are forced into doing this through absolutely no fault of their own.)
“ Fiddly bollocks”.. never was treasury policy so eloquently expressed. Thanks, Ian. This was just about within the limits of my understanding and to the point where I could actually learn something without my head falling off.
Thank you, very helpful. And absolutely right about the lack of a decent comms strategy.
Is it me or has my pet theory about economists being magicians with a plausible line in bullshit proven true? Enquiring minds need to know.
A good summary, thanks. Hopefully the current will-they-won't-they will get fixed in the budget, because industry has zero trust in the Treasury to deliver what it says it will do. And lack of trust costs money. Early decisions, stuck to and not fiddled with because of short term issues, are the only thing that will win that trust back and reduce costs.
And yet, we see HMT now looking again at the Transpennine Upgrade, a scheme I was working on over a decade ago and which still hasn't been delivered, to see how it can penny pinch. Plus ça change.
Great analysis. The only thing I'd add is that you can of course make a capital investment which reduces revenue spending. Fix that roof, save money on buckets.
Really helpful as usual.. thanks Ian
Thanks Ian - good to get into the weeds of things.
Read an interesting piece on New Zealand and how they undertake their national bookkeeping to best reflect national wealth - an idea Ken Clarke toyed with in the early 90s but couldn’t find any traction for.
Great analysis. Fundamental problem imo is that Net Zero investments are no investments at all. They simply replace stable low cost energy with unstable high cost energy.
Borrowing money and increasing taxes to invest in unproductive assets with no tangible net benefit to the economy is simply an economic cost that ultimately, inevitably devalues the currency and leaves all citizens less well off.
(and considering that the whole basis for Net Zero remains hypothesis poorly supported by real evidence, making it a central pillar of policy is baffling and irrational.)
cheers for this, v helpful
Article saved. I suspect I'll be referring back to it once or twice over the coming few years.
Thank you
A really helpful article
Will read it a few times and then I should be able to understand it