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Government Spending & the National Debt

The importance of knowing what a billion is for mere MPs 

The next time you hear a politician talk about throwing around a billion pounds or two, remember they are spending your money, not theirs.  A billion is difficult to comprehend, but the examples below may help to make it clearer.

A billion seconds ago it was 1988; a billion minutes ago it was 118 AD; a billion hours is 114,155 years; and a billion days is 2.73million years.  

It’s frightening to think that in 2019/20 the UK Government spent roughly a £billion every 10 hours.

Two billion seconds ago it was nearly 1960 when UK debt was £590 billion, which decreased to £457 billion in 1980. The figure in 2019 was £1.750 TRILLION, an increase of nearly four times. 

The aim of the majority of chancellors is to reduce the ever-increasing debt.  However, UK debt has skyrocketed by 283%.  Although this is huge, inflation would equate with £1.9 trillion i.e. it has increased less than inflation.

Below are some of the taxes introduced to provide funding for the nation, and one might have hoped they would have led to a reduction in the national debt.

·         Stamp Duty – Introduced in 1964

·         Council Tax – Introduced in 1993 replacing the rates but more expensive

·         VAT – Introduced in 1973 (with the UK joining the EU)

·         Inheritance tax – Introduced in 1986 replacing Estate Duty

These taxes were put in place, notionally, to reduce the UK debt, but by experience we know we can only do that by cutting taxes.

If these funds were used with common sense it could benefit future generations, despite the risk of future increases in taxes imposed by the less prudent governments.

The debt of the country might be looked at as a percentage of GDP, indicating the country’s ability to repay it.  £1.75 trillion does not seem quite so frightening since it is only 81% of UK GDP (2019), whilst in 1960 the debt was 107.7% and in 1948 it was 228% of GDP.   The UK is the fifth largest economy in the world, and comparing the UK ratio at 81% to the other big five economies reveals the USA at 106.7%, China 55.36%, Japan 237.54% and Germany 56.93%.  Japan being the least successful as it has a very old population and does not allow immigration - so 81% looks quite respectable.

Lowering taxes would lead to increased overall tax receipts, as Mrs Thatcher proved, by incentivising expansion and spending.  The highest income tax rate in 1980 was reduced from 83% to 60% and further reduced to 40% in 1989, although an additional rate of 45% was unwisely introduced by Gordon Brown in 2009 as a sop to the left.  In spite of which overall tax receipts increased from £69 billion in tax year 1980/81, to £638 billion in 2019/20.

Case proven we would suggest – so come on dishy we have to earn the billions, they’re ours!!


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