"Major cuts," is the cry. And I wonder. Mostly where the money is all going. For in the aggregate there are no cuts:
What’s more, the evidence indicates that U.K. has, at best, slowed down the growth of spending, but it has not engaged in actual spending cuts. I documented the trend in British spending earlier this year:
A look at the data in Her Majesty’s Fiscal Year 2012 Budget shows (see table 2.3) that total managed expenditures will increase from £696.4 billion in 2011–2012 to £733.5 billion in 2014–2015, and further to £756.3 billion in 2016–2017. Adjusted for population growth, this is slow growth, but not a savage cut. That table also shows a “projected” drop in Public Sector Gross Investment between 2012–2013, but if it ever materializes, it will be contained to that year alone.
And we're paying through the nose too:
Spending cuts in the UK can’t be blamed for the weak growth path the country is on. On the other hand, tax increases can. Here is a list:
(For more, go here.) The bottom line is that the U.K. is another case of private-sector austerity (i.e., tax hikes) without public-sector austerity (i.e., spending cuts).
- a VAT hike from 17.5 percent to 20 percent (probably the main culprit of the U.K.’s current problems)
- a new 50 percent tax bracket on incomes over £150,000, which will drop to 45 percent next year
- an increase in air-passenger duty to 8 percent
- “temporary” payroll tax of 50 percent on bonuses over £25,000
- a capital-gains tax hike
- a 0.088 percent levy on banks
- an increase to 7 percent in the stamp duty on the sale of properties worth more than £2 million and on properties bought through “non-natural persons.”
To paraphrase Ray Davies, I remain, yours truly...