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The national debt rises, again

Corporation tax revenue plummets, leaving a hole in the nation's finances.

The UK deficit has, again, grown.

ONS statistics show that the government has accrued £3.4bn more in debt since July 2011, leading to a current deficit of £600m. This stands in contrast to last year's £2.8bn surplus.

While local government borrowing has decreased by £100m in the past year, a year-on-year drop of 0.8 per cent in receipts and a 7.3 percent increase in expenditures has increased central government borrowing by £3.5bn.

The shortfall is mainly due to a precipitous decline of 19.3 per cent (year-on-year) in corporate tax revenue that has deprived the Treasury of £1.7bn compared to last year. As reported in the Guardian, a Treasury spokesman has attributed the fall in corporate tax receipts to a cut in North Sea oil production. Contrastingly, in part due to the 2010 VAT rate increase, VAT revenue has risen by £12.4bn, or 6.3 per cent. Similarly, income tax and capital gains revenue has noted a year-on-year increase of 1.1 per cent, despite a £200m drop (0.5 per cent) since April. Compulsory social contributions, on the other hand, have grown by 4.2 per cent since last year, pointing to the paradoxical buoyancy of the labour market.

With an overall £0.4 billion decrease in revenue since last year, the Treasury warns that the number may be overstated due to yearly variations in self-assessment tax receipts and points to the possibility of inflated numbers for August.

Still, the government's finances are in dire shape. Expenditures have gone up by 5.1 per cent, or £2.4bn, in a year (this is excluding debt interest payments), with a notable increase of £900m on social benefits.

As economists have recently noted, the numbers are grim and disappointing. Some, like Jason Coniber of Cambridge Mercantile, have taken this as a final testament to Osborne's failed austerity:

Plan A now has so many holes in it, it is fast resembling a piece of Swiss cheese. Despite the government's austerity measures, it still seems powerless to reduce the deficit. Net debt continues to march upwards, and now stands at nearly two thirds of GDP. The government is borrowing more to pay the bills too - all of which makes a mockery of the chancellor's centrepiece economic policy. While Plan A is a fine idea in theory, the chancellor's obsessive focus on deficit reduction isn't working; and to make matters worse, it is distracting him from the underperforming economy as a whole. When austerity is merely an article of blind faith and not an economic instrument, something is badly wrong

Others continue to support government cuts as a means to financial credibility.

However, almost unanimously, economists agree that the government must back proactive growth reforms to prevent further contraction. The debate stands as to how this is to be done. Phillip Shaw of Investec suggests monetary policy (i.e. quantitative easing) as the less risky (but most likely fallible) way to spur growth, while David Kern of the British Chambers of Commerce suggests "more deregulation, increased infrastructure spending, and the creation of a state-backed business bank".

Photo: Getty Images
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No, IDS, welfare isn't a path to wealth. Quite the opposite, in fact

Far from being a lifestyle choice, welfare is all too often a struggle for survival.

Iain Duncan Smith really is the gift that keeps on giving. You get one bile-filled giftbag of small-minded, hypocritical nastiness and, just when you think it has no more pain to inflict, off comes another ghastly layer of wrapping paper and out oozes some more. He is a game of Pass the Parcel for people who hate humanity.
For reasons beyond current understanding, the Conservative party not only let him have his own department but set him loose on a stage at their conference, despite the fact that there was both a microphone and an audience and that people might hear and report on what he was going to say. It’s almost like they don’t care that the man in charge of the benefits system displays a fundamental - and, dare I say, deliberate - misunderstanding of what that system is for.
IDS took to the stage to tell the disabled people of Britain - or as he likes to think of us, the not “normal” people of Britain -  “We won’t lift you out of poverty by simply transferring taxpayers’ money to you. With our help, you’ll work your way out of poverty.” It really is fascinating that he was allowed to make such an important speech on Opposite Day.
Iain Duncan Smith is a man possessed by the concept of work. That’s why he put in so many hours and Universal Credit was such a roaring success. Work, when available and suitable and accessible, is a wonderful thing, but for those unable to access it, the welfare system is a crucial safety net that keeps them from becoming totally impoverished.
Benefits absolutely should be the route out of poverty. They are the essential buffer between people and penury. Iain Duncan Smith speaks as though there is a weekly rollover on them, building and building until claimants can skip into the kind of mansion he lives in. They are not that. They are a small stipend to keep body and soul together.
Benefits shouldn’t be a route to wealth and DWP cuts have ensured that, but the notion that we should leave people in poverty astounds me. The people who rely on benefits don’t see it as a quick buck, an easy income. We cannot be the kind of society who is content to leave people destitute because they are unable to work, through long-term illness or short-term job-seeking. Without benefits, people are literally starving. People don’t go to food banks because Waitrose are out of asparagus. They go because the government has snipped away at their benefits until they have become too poor to feed themselves.
The utter hypocrisy of telling disabled people to work themselves out of poverty while cutting Access to Work is so audacious as to be almost impressive. IDS suggests that suitable jobs for disabled workers are constantly popping out of the ground like daisies, despite the fact that his own government closed 36 Remploy factories. If he wants people to work their way out of poverty, he has make it very easy to find that work.
His speech was riddled with odious little snippets digging at those who rely on his department. No one is “simply transferring taxpayers’ money” to claimants, as though every Friday he sits down with his card reader to do some online banking, sneaking into people’s accounts and spiriting their cash away to the scrounging masses. Anyone who has come within ten feet of claiming benefits knows it is far from a simple process.
He is incredulous that if a doctor says you are too sick to work, you get signed off work, as though doctors are untrained apes that somehow gained access to a pen. This is only the latest absurd episode in DWP’s ongoing deep mistrust of the medical profession, whose knowledge of their own patients is often ignored in favour of a brief assessment by an outside agency. IDS implies it is yes-no question that GPs ask; you’re either well enough to work or signed off indefinitely to leech from the state. This is simply not true. GPs can recommend their patients for differing approaches for remaining in work, be it a phased return or adapted circumstances and they do tend to have the advantage over the DWP’s agency of having actually met their patient before.
I have read enough stories of the callous ineptitude of sanctions and cuts starving the people we are meant to be protecting. A robust welfare system is the sign of a society that cares for those in need. We need to provide accessible, suitable jobs for those who can work and accessible, suitable benefits for those who can’t. That truly would be a gift that keeps giving.