Osborne shouldn't spend the extra money

TomTom

Yes Fraser, if only he put VAT on food, water, prescriptions, Council Tax, TV Licence, Childrens' clothes, funerals, school fees, and postage he's be rolling in money.......then we could all claim Benefits because we'd be out of work and insolvent.

We are soaked with tax. Look how much it takes of Gross Income to pay Council Tax.....

DavidDP

"The slightest sign of slippage"

A more balanced person who truly wants to deal with the deficit would apply this to tax, as well as spending. You've made the case for an emergency tax cut? I'm sure there's a case for emergency spending too.....

2trueblue

Good news but hardly a signal to go on a spending spree. Liebore will use it to be negative.

GDT

hang on, there is no extra money, just money not borrowed. as i see it he has no money for a tax break or extra spending....FFS no wonder this country is in such a state.

Nick

But there's slippage on the cuts already.

There's no £200m from the forestry sell-off for instance.

And there will be some back-tracking on the EMA cuts etc.

Ian Walker

He should use it to publicly pay off some debt. Yes, it would be pointless in the grand scheme of things, but it might help jumpstart the defecit reduction narrative, which is being swamped by the zombie chant of "cuts" from the Left and their useful idiots.

If any private individual came into some unexpected money, every financial adviser would tell them to pay off their high-cost debt first. Why not the same for the country?

Tim W

How can you advocate an emergency tax cut? By the fact you're saying that he can use this money on a tax cut suggests that the tax cut is not a 'revenue-raising tax cut' like abolishing the 50p rate. Therefore you're not cutting the deficit.

Osborne should basically not do anything with the 'extra' £8bn apart from not borrowing it in the first place. We pay interest on everything we borrow remember. Having said that, I'd be tempted to spend £1bn on buildings for new schools.

Simon Stephenson

" I have made the case for an emergency tax cut for the low-paid, to speed the IDS reforms and further incentivise the unemployed to take the jobs which (as I blogged on Sunday) immigrants are taking."

Well, you haven't "made" the case, you've just advanced, or presented it. To have "made" it, you'ld have had to have shown it to be true. As it is you've just presented it as something that might be true.

AlanL

Fraser - you've been sucked in by Ballsonomics. As has been said, not being quite so deep in the hole as you thought you might is not the same as having surplus money.

It would be reckless to borrow it just because it was in our plans, and then ask (as you have) what to do with it.

Why don't we NOT borrow a little bit, just for a change. That way, we will get into surplus faster.

David

WERE IS ED BALLS

Simon Stephenson

AlanL

"Why don't we NOT borrow a little bit, just for a change. That way, we will get into surplus faster."

Well, because the Chancellor will see this as a bit of underutilised good news. He won't want to show an £8billion underspend all in one go, because he'll get a lot more kudos from showing half of it this year, and the other half next year.

Creative accounting - ain't it great!

Extranea

These results sadly show how the ideological need to reduce the state as quickly as possible and at whatever cost does not equate with the reasons we have the deficit. http://bit.ly/eqcRfq

The deficit above the 3% of GDP has occurred as a result of the decrease in tax take. As the economy recovers or IF the economy recovers, then the tax take will pick up and the gap narrow.

This does not mean there should not be cuts, but that the wholesale ideological cuts being imposed on councils(and then blaming councils for the cuts) is not needed.

Pragmatism not ideology is what we need. In a time of great need we require the state to help and not crush the weakest and most vulnerable in our society. That is what the inter war years taught us.

normanc

I always dread January - corporation tax, PAYE, National Insurance and VAT all due at once.

normanc

I always dread January - corporation tax, NI, PAYE and VAT all in the same month.

(Apologies if this is double post, timed out first time).

alexsandr

he should make a thing of this. Go somewhere with a sack of tenners to pay some debt off. Good photo opportunity!

Simon Stephenson

Extranea : 1.52pm

What you totally fail to deal with is that the basic principle of Keynes's economics is that the fiscal overspends in the downturns are matched by underspends in the upturns, so that over the entire business cycle there is neutrality as far as the automatic stabilisers are concerned. So when (or if, as you say) the recovery comes, the gap has to do much more than narrow - it must reverse.

The big Brownite lie throughout the noughties was that the relatively small deficits were the totality of structural overspend. This was arrant nonsense, since under a balanced fiscal cycle there would have had to have been a significant cyclical surplus over this period. Structural overspend was therefore considerably greater than the left is now admitting to, and this is the reason for the "ideological" cuts that they are claiming as unnecessary.

Contemporary Labour economic claims are desperate falsehoods, they really are.

TrevorsDen

If debt is cleared sooner then we can get better tax cuts in 2015. If revenues are holding up we must hope growth is better than expected.

If more debt is paid off now then we are in a better position to face any shocks later.

Ian Walker

alexsandr: I made the same point - a nice big show in public: "8bn of Labour's debt cancelled - thanks Britain for your efforts in reducing Ed Balls' legacy"

alexsandr

Apologies, mr Walker, I missed that!

normanc

TrevorsDen, you do realise that not a penny of debt is going to be paid back for at least 5 more years, possibly a lot longer?

The government is going to double the national debt. I know a lot of it is Labour's fault, and I konw they're cutting the deficit 1% faster than Labour would have, but to think that we'll ever see this debt paid down is la-la land thinking.

Best case scenario we eliminate the deficit and tread water with interest only payments until Labour next get in to wreck things again.

2trueblue

normanc. Frustrating that they all talk of the deficit and not the real big fat debt which justs sits there. We all know it but no one talks about it.

Dimoto

Both the Mail and the Telegraph have identically worded paragraphs, (presumably inserted at the behest of their Balls loving editor/owners), to the effect that this modest surplus throws "further doubt" on the need for £81B of cuts - I fully expect the BBC to join this chorus later.

Fraser's incentives are a bit daft in a context where vacancies are in short supply. A couple billion spent on a further reduction in corporate income tax could be helpful for the "growth agenda" though.

But the bulk of any "surplus" must be used to reduce borrowing.

Normanc - don't be such a drama queen, of course the debt will be paid down.
(I remember my 18 year old, but economically literate, brother telling me in 1959, that "the war debt will never be paid off" - which was indeed the orthodoxy of the chattering classes at that time).

Simon Stephenson

Dimoto : 7.23pm

"(I remember my 18 year old, but economically literate, brother telling me in 1959, that "the war debt will never be paid off" - which was indeed the orthodoxy of the chattering classes at that time)."

Without hidden default through inflation, would it ever have been paid off? And does value-diminution through inflation actually count as "paying it off"?

Maybe your brother and the chattering classes weren't so very wrong, after all?

John Moss

Please don't spend it. Reduce taxes with it.

It probably costs the economy £2 in tax for every £1 the Government spends.

If the Government can spare it, they should cut fuel duty and leave the money in the pockets of people and businesses, where it will grow and generate more tax receipts.

Noa.

Poor old Fraser it's a hopeless task trying to talk up a tax surplus but for the mindless optimist he's not made a bad fist of it.

Continuing with the mindless optimism a continuing £3.7b surplus would deliver £44b per year. Hooray! That's enough to pay the years debt interest-just.
Or if we could use it to pay down debt then in about 35 years we would be back in the black.

I suspect that in terms of ever clearing it, we have a better hope of being swallowed by a real black hole.

Brown and bust has well and truly replaced Boom and...

Talking of the Debt, do you rather miss that ticking clock the Spectator ran during the election run up?

For those who want to depress themselves by having said time bomb to hand I attach a link below.

Noa.

And here's that promised link:-

http://www.debtbombshell.com/

It doesn't add up...

I'd bet that the tax revenue boost proves artificial. A chunk will be simply down to higher than budgeted oil prices benefiting North Sea CT revenue. Another chunk will have been people crystallising CGT liabilities under the old CGT regime knowing that a tougher regime was coming in: CGT revenue has probably collapsed since then. Underlying tax revenue could turn out to be quite weak, with declines also because of the 50p rate. In short, there is probably no ongoing tax revenue bonus (well, except until the oil price falls after the Middle East settles back down and Bernanke has stopped pumping QE dollars into commodity markets).

Of course by then Osborne will have his fuel price stabiliser to keep tax revenues up as oil prices fall, leaving the economy "greener" - i.e. more uncompetitive. Revenue on other taxes will likely disappoint unless the economy can be made more competitive. Less regulation, lower tax rates...

VJ

Borrowing 148 Billion
Tex surplus 8 Billion
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New Borrowing 140 Billion
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We are still borrowing, so there is no new money to spend, it mean we borrow LESS !!!