Latest ONS public sector finances data shows the need for deeper cuts

June 21, 2011 7:05 PM

The Treasury and Office for National Statistics have released the latest public sector finances statistical bulletin with figures relating to April and May. For all the talk in the media of ‘savage cuts’, total current expenditure rose from £50.6 billion in May last year to £51.7 billion in May 2011. Meanwhile, current receipts rose from £35.1 to £38 billion. After net investment is added, that leaves net borrowing at £17.1 billion, down from £19.3 billion.

[caption id="" align="alignright" width="240" caption="Government spends £4 for every £3 raised in tax"][/caption]

These figures show that the need for a fiscal retraction remains overwhelming. The UK borrowed over £17 billion pounds in May alone because the £38 billion raised in tax was not enough to fund Government spending. The events unfolding in Greece show that the greater risk does not lie in the Coalition Government’s timid cuts being too hard but instead that they’re too small. The British economy desperately needs tax cuts and tax simplification but it also needs to close the huge deficit these figures reveal.

Once social benefits and interest charges are stripped out, remaining current expenditure rose only slightly, from £32.5 billion in May 2010 to £32.6 billion in May 2011. This shows that the Government is showing restraint that would be, in a more benign environment, admirable. But for a government that is spending more than £4 for every £3 it can raise in taxation, it simply isn’t good enough.The Treasury and Office for National Statistics have released the latest public sector finances statistical bulletin with figures relating to April and May. For all the talk in the media of ‘savage cuts’, total current expenditure rose from £50.6 billion in May last year to £51.7 billion in May 2011. Meanwhile, current receipts rose from £35.1 to £38 billion. After net investment is added, that leaves net borrowing at £17.1 billion, down from £19.3 billion.

[caption id="" align="alignright" width="240" caption="Government spends £4 for every £3 raised in tax"][/caption]

These figures show that the need for a fiscal retraction remains overwhelming. The UK borrowed over £17 billion pounds in May alone because the £38 billion raised in tax was not enough to fund Government spending. The events unfolding in Greece show that the greater risk does not lie in the Coalition Government’s timid cuts being too hard but instead that they’re too small. The British economy desperately needs tax cuts and tax simplification but it also needs to close the huge deficit these figures reveal.

Once social benefits and interest charges are stripped out, remaining current expenditure rose only slightly, from £32.5 billion in May 2010 to £32.6 billion in May 2011. This shows that the Government is showing restraint that would be, in a more benign environment, admirable. But for a government that is spending more than £4 for every £3 it can raise in taxation, it simply isn’t good enough.

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