Government borrowing falls in September

The UK’s net public debt stands at £1.21 trillion, or 75.9% of the Gross Domestic Product (GDP) of the nation.

As high as that is, the Chancellor of the Exchequer, George Osborne, was pleased to see Government borrowing (excluding past bank bail-outs) dip to£11.1bn in September. This is lower than the £12.1bn reported in September 2012. Much of this improvement was because of higher tax receipts.

Between April and September 2013, the Government’s cash receipts were £265.3bn, an increase from the £237bn recorded a year earlier.

The coalition Government has stated that it wishes to reduce the deficit to less than £120bn in the 2013/14 tax year, excluding any cash transfers from the Bank of England, as a result of its quantitative easing programme, or the Royal Mail flotation and its attendant pension funds.

Having said this, they appear to be on track, as the first six months of this tax year saw them report a deficit of £56.7bn, which is a reduction of 9% from the same period last year.

The medium-term aspiration of the Government is to eliminate the budget deficit entirely by 2020. Speaking at a recent Thomson Reuters symposium, George Osborne was quoted as saying, that whilst the country’s economic problems were not yet over: “An improving economic situation in the UK does not automatically lead to a windfall for the public finances… we are going to go on as a Government having to take very difficult decisions to control public spending and make sure we are on top of the deficit.”

The continuing recent tranche of positive economic data, across retail sales, housing, unemployment and trade, has reinforced the opinion that the Government is on track to meet its aspirations for reduced borrowing this current tax year; however, the jury is still out.

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Increasing wealth tax, will it drive out the rich?

There has been much talk this week about the UK economy being hampered if the coalition insists in pushing up tax for the rich, although it could be argued that most rich are already contributing far more than other people to the country.

Hollande, France’s new socialist President has also taken the same tact, to increase tax on the rich, which has met fierce opposition. But the question remains, although we have offered to lay out the ‘red carpet’ to France’s super rich, are we as a country not driving out the rich too, but just in a lesser degree, as we have already seen several hedge funds moving abroad.

George Osborne, Chancellor expressed his concerns over the new plans during his visit to Sunderland, where he stated:  "I am clear that the wealthy should pay more, which is why in the recent budget I increased the tax on very expensive property transactions. But we also have to be careful as a country we don't drive away the wealth creators and the businesses that are going to lead our economic recovery."

Nick Clegg has already agreed to cut the top tax rate from 50p to 45p and has since indicated that he intends to increase wealth tax, and we will see no more increase on income tax in the UK for the time being. The coalition sentiment is that by tax the richest in the country, with it’s proposed tax on homes of £2 million and over would help the country pay off it’s deficit and improve the economic situation for the long term. We will have to wait until September to find out what the new proposed changes are going to be at their party conference.