Quizzes & Puzzles2 mins ago
Osborne Push To Budget Surplus
George Osborne wants to make setting a budget deficit illegal and wants to bind future Governments by introducing a law compelling them to make a surplus.
Being in surplus is very desirable and is a great trick to pull off. But we have had only 6 surplus budgets in the last 40 years (2 under the Tories, and 4 under Labour).
In 2010 Osborne pledged to reduce the deficit by 100% by 2015. He of course failed and reduced it by only 30% at the expense of doubling the National Debt.
Has George set himself an impossible goal again?
Being in surplus is very desirable and is a great trick to pull off. But we have had only 6 surplus budgets in the last 40 years (2 under the Tories, and 4 under Labour).
In 2010 Osborne pledged to reduce the deficit by 100% by 2015. He of course failed and reduced it by only 30% at the expense of doubling the National Debt.
Has George set himself an impossible goal again?
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I heard this on the radio this morning. I stress I have not investigated the story further, but it suggests to me that Osbourne is appearing to be unfit for his present position. Balancing the budget or making a surplus is an aim. It can not be allowed to hog-tie future chancellors. Think of having to repeal it before being able to make the right decision ! It doesn't bear thinking about.
A comparison. Suppose you are driving down a road where the speed limit is 30. It is illegal to do more. Someone else does something foolish and in order to avoid an accident you would have to increase your speed to 40, otherwise folk will get hurt. Who in their right mind says above 30 is against the law, we have to obey it, so all those folk now must get injured ? It's a comparable position. No one wants a budget in deficit but sometimes one has to borrow to fix things today in order to invest and avoid a looming disaster.
One should make surpluses in good or boom times in order to have enough in the coffers during the slumps, and lower the risk of needing to borrow, but to insist it is always obligatory would be simply madness.
A comparison. Suppose you are driving down a road where the speed limit is 30. It is illegal to do more. Someone else does something foolish and in order to avoid an accident you would have to increase your speed to 40, otherwise folk will get hurt. Who in their right mind says above 30 is against the law, we have to obey it, so all those folk now must get injured ? It's a comparable position. No one wants a budget in deficit but sometimes one has to borrow to fix things today in order to invest and avoid a looming disaster.
One should make surpluses in good or boom times in order to have enough in the coffers during the slumps, and lower the risk of needing to borrow, but to insist it is always obligatory would be simply madness.
As has already been said, no government can create a law which binds future governments. They can simply repeal it on election.
This idea is just a typical Tory ploy whereby - when the possible bill is being discussed in parliament - Tories can shout across the floor, "Do you or don't you agree that being permanently in surplus is a good thing?" Any negative answer will then be pounced on as evidence that the opposition thinks being "well-off" is a bad thing, even though there may be cicumstances in which it genuinely IS a bad thing...eg investing capital for growth rather than stockpiling it.
The problem is that large chunks of the electorate are likely to fall for it...again!
This idea is just a typical Tory ploy whereby - when the possible bill is being discussed in parliament - Tories can shout across the floor, "Do you or don't you agree that being permanently in surplus is a good thing?" Any negative answer will then be pounced on as evidence that the opposition thinks being "well-off" is a bad thing, even though there may be cicumstances in which it genuinely IS a bad thing...eg investing capital for growth rather than stockpiling it.
The problem is that large chunks of the electorate are likely to fall for it...again!
I think the more important point here is not the issue itself (i.e. the rights and wrongs of running a budget deficit or surplus) but the fairly recent phenomenon of passing legislation on matters which should be issues for individual governments or even annual budgets.
Things that spring to mind are the State pension “triple lock” (enshrined in law) and the overseas aid budget (enshrined in law). And now this. These are matters that should be decided “on the hoof”. One year we may be able to afford them, another year maybe not. That’s what annual budgets are for – to adjust taxation and spending to suit prevailing circumstances and/or changes in policy.
As QM rightly points out, only the gullible will be fooled by such antics. No government can bind its successors. In fact no government can actually bind itself from one year to the next as the option to repeal or revise legislation is always available. As with many things that politicians spout, it’s smoke and mirrors.
Things that spring to mind are the State pension “triple lock” (enshrined in law) and the overseas aid budget (enshrined in law). And now this. These are matters that should be decided “on the hoof”. One year we may be able to afford them, another year maybe not. That’s what annual budgets are for – to adjust taxation and spending to suit prevailing circumstances and/or changes in policy.
As QM rightly points out, only the gullible will be fooled by such antics. No government can bind its successors. In fact no government can actually bind itself from one year to the next as the option to repeal or revise legislation is always available. As with many things that politicians spout, it’s smoke and mirrors.
// One year we may be able to afford them, another year maybe not. //
That is why the Overseas Aid budget is not a fixed amount, it is 0.7%of GDP. When the economy is doing less well, we pay less. When the economy is booming, we pay more. cameron is not going to change this because it is a clear statement to the rest of the world that the UK is a major player on the world stage. Most of the other G20 countries pay the same levy, it is only countries that are on their Yabbie that don't.
That is why the Overseas Aid budget is not a fixed amount, it is 0.7%of GDP. When the economy is doing less well, we pay less. When the economy is booming, we pay more. cameron is not going to change this because it is a clear statement to the rest of the world that the UK is a major player on the world stage. Most of the other G20 countries pay the same levy, it is only countries that are on their Yabbie that don't.
GDP is not a measure of affordability. It's rather like saying the more you earn the more you can afford to spend on luxuries. It ain't necessarily so because your expenditure on essentials may have increased by a greater amount than your earnings.
Now if the legislation had said we should spend 0.7% (or whatever) of the nation's budget surplus I might be more disposed towards it. (Well I wouldn't actually, but it would make more sense).
Now if the legislation had said we should spend 0.7% (or whatever) of the nation's budget surplus I might be more disposed towards it. (Well I wouldn't actually, but it would make more sense).
"A comparison. Suppose you are driving down a road where the speed limit is 30. It is illegal to do more. Someone else does something foolish and in order to avoid an accident you would have to increase your speed to 40, otherwise folk will get hurt. Who in their right mind says above 30 is against the law, we have to obey..."
Take a trawl through the motoring section of AB, and you'll find plenty of AB'ers over the years who have said 'the limit must be obeyed' and would not entertain any rational reasons why it should not be.....so under the circumstances, while I agree with the comparison, I suspect there will be many that will not!
Take a trawl through the motoring section of AB, and you'll find plenty of AB'ers over the years who have said 'the limit must be obeyed' and would not entertain any rational reasons why it should not be.....so under the circumstances, while I agree with the comparison, I suspect there will be many that will not!
> George Osborne wants to make setting a budget deficit illegal and wants to bind future Governments by introducing a law compelling them to make a surplus.
That's not an entirely accurate representation of the situation. The first link you later provided (the BBC one) begins as follows:
> The chancellor will attempt to bind future governments to maintaining a budget surplus when the economy is growing, he will announce later. In his annual speech Mansion House speech on Wednesday George Osborne will outline his plan to limit governments to a balanced budget in "normal" times.
Note the "when the economy is growing". That's an important caveat. What he's objecting to, rightly, is a situation like the one in which Labour created a huge deficit by running a deficit both when the economy was shrinking and when it was growing.
> there's no way he can bind future governments; that would imply that his successors wouldn't have sovereignty over their own budgets.
I agree with the principle of your statement, but enshrining this in law is no worse than binding a future government by being incompetent with the finances and then saddling that future government with a huge deficit.
A future government could overturn this law, but that would be a warning signal that they intended to be profligate with the finances again.
That's not an entirely accurate representation of the situation. The first link you later provided (the BBC one) begins as follows:
> The chancellor will attempt to bind future governments to maintaining a budget surplus when the economy is growing, he will announce later. In his annual speech Mansion House speech on Wednesday George Osborne will outline his plan to limit governments to a balanced budget in "normal" times.
Note the "when the economy is growing". That's an important caveat. What he's objecting to, rightly, is a situation like the one in which Labour created a huge deficit by running a deficit both when the economy was shrinking and when it was growing.
> there's no way he can bind future governments; that would imply that his successors wouldn't have sovereignty over their own budgets.
I agree with the principle of your statement, but enshrining this in law is no worse than binding a future government by being incompetent with the finances and then saddling that future government with a huge deficit.
A future government could overturn this law, but that would be a warning signal that they intended to be profligate with the finances again.
Gromit // Most of the other G20 countries pay the same levy, it is only countries that are on their Yabbie that don't.//
I do wish you'd stop endlessly repeating that lie, gromit. Every time foreign aid gets an airing on AB you repeat it and every time I have to reply that none of the G20 countries pay anything approaching the % of GNI that the UK does. Don't make me publish the list, again, as it will prove embarrassing for you. And don't go searching the net to find spurious future spending projections, as you once did, because, once again, that will prove doubly embarrassing. (again)
I do wish you'd stop endlessly repeating that lie, gromit. Every time foreign aid gets an airing on AB you repeat it and every time I have to reply that none of the G20 countries pay anything approaching the % of GNI that the UK does. Don't make me publish the list, again, as it will prove embarrassing for you. And don't go searching the net to find spurious future spending projections, as you once did, because, once again, that will prove doubly embarrassing. (again)
Apologies svejk, you are right.
I had read that many developed countries had signed up to the 0.7% target. What I failed to recognise is that most of them do not achieve it.
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I had read that many developed countries had signed up to the 0.7% target. What I failed to recognise is that most of them do not achieve it.
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