Limiting the amount of borrowing the government can set out in its Budget each year to no more than 10% of its total expenditure.

The Chancellor's (pre-election) Report in December 2009 stated that in 2009-10 the government expected to spend £675.7 billion, an increase of £47.9 billion, 7.6%, on the £627.8 billion spent in 2008-9.  The major areas of expenditure are Social Security and Services (£219 bn), Health (£119 bn), Education (£88 bn), Defence (£38 bn), Public Order (£36 bn), Housing (£30 bn), Debt Interest (£30 bn), Transport (£23 bn), Industry/Agriculture (£21 bn) and Other (£72 bn).

However tax and other receipts by the government in 2009-10 are forecast at only £498.1 billion which is 6.1% below the £532.4 billion received in 2008-9.  The revenue is from income tax (£140 bn), social security (£95 bn), VAT (£67 bn), excise duties (£44 bn), corporation tax (£34 bn), council tax (£25 bn), business rates (£24 bn) and Other (£68 bn).

As a result in 2009-10, the government will have to borrow £177.6 billion (£675.7 bn less £498.1 bn). This represents 26.3% of the government's expenditure: over a quarter of all government expenditure is being paid for by borrowing. This is an unsustainable rate which could lead to the UK's credit rating being reduced from the current top AAA level. This will increase interest rates and seriously weaken the economy as has recently happened with both Greece and Ireland.  In January 2010, Bill Gross, managing director at Pimco, the world's biggest bond house, advised against buying UK gilts because they were 'resting on a bed of nitro-glycerine'. Even more importantly, the cost of current state spending will be paid for by our children/grandchildren who will be saddled with this huge debt.

Despite this, the government is budgeting that net borrowing next year (2010-11) will again be 25% of expenditure as shown in the top part of the table below.  The Pre-Budget forecast shows it in subsequent years to be £140 bn in 2011-2 and £117 bn in 2012-3 when cumulative debt will reach 75.4 % of GNP, up from 44.0% in April 2009.  None of the traditional parties have set out any details of how they will actually even get the borrowing reduced to these levels.  It can only be achieved either by increases in taxes or reductions in expenditure and the current system is too dominated by party political thinking and trying to win elections rather deciding what is best for the country.  

The Jury Team Policy requires the government to present a Budget in all years from 2012-3 with borrowing as no more than 10% of government expenditure (roughly equivalent to 4% of the country's GNP) with a staging post of 17.5% in 2011-2.  The electorate seems to prefer most of the reduction in the deficit to come from reducing public expenditure rather than from raising taxes.  This can be achieved by cutting expenditure by 2.5% in 2011-2 and by 6.6% in 2012-3 from the currently forecast levels.  2012-3 expenditure will still be 9% higher than in 2008-9.  The Jury Team will ask the electorate, especially employees of public organisations, to suggest through a website where waste can be cut while maintaining or improving services.  No element of government costs should be immune.  Savings would also result from leaving the EU, controlling housing benefit, reducing troops in Afghanistan and medical insurance for visa holders.

The policy is framed in terms of the Budget to be presented to Parliament each Spring.  This will have to show the borrowing required to finance government expenditure as below the percentage limit set by the Proposal.  If there is a major change in the country's circumstances during the year then the borrowing might increase above the prescribed limit in practice but the government will have to make plans to bring the cumulative borrowing back under control by the next Budget or will have to seek referendum approval for the change.

 

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