{"id":3050,"date":"2010-08-19T12:02:29","date_gmt":"2010-08-19T12:02:29","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3050"},"modified":"2025-03-27T15:49:06","modified_gmt":"2025-03-27T15:49:06","slug":"uk-public-finances-improving-was-the-vat-rise-necessary","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3050","title":{"rendered":"UK public finances improving &#8211; was the VAT rise necessary?"},"content":{"rendered":"<p>The latest public finances numbers remain consistent with a substantial undershoot of the Office for Budget Responsibility (OBR) forecast of net borrowing of &pound;149 billion in 2010-11 (excluding the temporary impact of financial interventions).<\/p>\n<p>Attempting to adjust for seasonal factors, borrowing averaged about &pound;12 billion in the first four months of the fiscal year, or &pound;144 billion annualised &ndash; see chart. The OBR forecast, therefore, implies a worsening over the remainder of 2010-11.<\/p>\n<p>This is unlikely because, first, the benefits of economic recovery should grow as the year progresses and, secondly, the coalition has announced &pound;8.1 billion of spending cuts and tax rises in 2010-11, most of which has yet to take effect. Put differently, even assuming no further impact from an improving economy, these measures together with the recent run-rate imply borrowing of &pound;136 billion this year (i.e. &pound;144 billion minus &pound;8 billion), &pound;13 billion less than the OBR&#8217;s forecast.<\/p>\n<p>The evolving undershoot increases <a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2010\/6\/22\/uk-emergency-budget-was-the-vat-rise-necessary.html\">doubts<\/a> about the wisdom of the coming VAT rise &ndash; projected to raise &pound;2.9 billion and &pound;12.1 billion in 2010-11 and 2011-12 respectively. This increase threatens to <a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2010\/7\/6\/uk-budget-further-reflections.html\">weaken<\/a> the economic recovery and was not strictly necessary to meet the new fiscal target of current budget balance by the end of the parliament, even according to the OBR&#8217;s June forecast.<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/uk-public-sector190810.gif?__SQUARESPACE_CACHEVERSION=1282222113599\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The latest public finances numbers remain consistent with a substantial undershoot of the Office for Budget Responsibility (OBR) forecast of net borrowing of &pound;149 billion in 2010-11 (excluding the temporary impact of financial interventions). Attempting to adjust for seasonal factors, borrowing averaged about &pound;12 billion in the first four months of the fiscal year, or [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3050","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3050","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3050"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3050\/revisions"}],"predecessor-version":[{"id":5359,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3050\/revisions\/5359"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3050"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3050"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3050"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}