How Broke Is Britain? Wealth Week Episode 33

I’ve been saying for years that the government is broke. Today we look at just how broke with the publication of what’s called the Whole of Government Accounts` for the year ended March 2021. In these accounts income means only one thing – how much tax they’ve shaken you and I down for in the previous tax year. It was actually down on the previous year, from £813 billion in 2020 to £731 billion in 2021. Presumably the impact of Banana Syndrome on VAT, corporation tax and income tax. Expenditure had already been increasing by £40 or £50 billion a year since 2016 but in 2021, again presumably due to the pandemic handouts, its shot up by £145 billion to stand at £1.03 trillion pounds.
Taking a view across the last five years, the gap between income and expenditure is £577 billion to be added to the red ink already on the UK balance sheet. Total assets have remained eerily steady at around the £2 trillion mark during that half decade, while liabilities have steadily risen from £4.3 trillion to £5.5 trillion.
What I find remarkable looking across the years since 2016 is how the total tax take has remained remarkably consistent at around £700 to £800 billion. The first thing this confirms is that our economy is not growing, otherwise there would be more corporation tax, more income tax , more VAT and so on being paid. But we do know that the tax burden has increased due to fiscal drag and inflation, so my second conclusion is that a smaller number of people must now be paying a larger amount of tax.
So if revenue has remained flat, where are the costs increasing that add up to the ever widening budget deficit? The first area is staffing. Our ever-increasing army of civil servants, bureaucrats and regulators represent about the only growth sector left in the British economy. In 2016 the annual wage bill was a mere £191 billion. By 2021 it had risen to a quarter of a trillion pounds, a 33% increase. Did you notice the service you receive from government departments becoming 33% better? Me neither. The other big hike is in grants and subsidies, a near 400% increase from £53 billion to just under £200 billion. I’m leaving out the figures after the decimal point because the odd £500 million doesn’t even move the needle at these levels.
The asset column of the balance sheet makes interesting reading. £1.2 trillion is held in property which includes not just government buildings but the entire road and rail networks, potholes and all. Financial assets include the one third holding in the disgraced NatWest bank as well as the entire student loan portfolio for all the Media Studies graduates now working at Starbucks. To paraphrase the Everly Brothers (ask your parents) ‘it’s so hard to see good loans go bad…’.
On the liabilities side, red ink outweighs black by a factor of 250%, the biggest hole being those gold plated public sector pensions. You and I will be forking over £2.3 trillion for the existing not-so-civil servants and that’s before all those new recruits start qualifying for the golden handcuffs. At the time of these accounts government debt amounted to £1.2 trillion but I suspect that figure is much higher today. In an auction of government bonds last week they had to offer over 5% to find a buyer. Interest costs are already forecast to be well over £100 billion this year so get ready for a big hike in interest in 2023/24.
In this woke world you’ve got to be very careful what you laugh at, but thank heavens there will always be forecasts from the Office for Budget Irresponsibility. In the latest Whole of Government accounts they anticipate inflation, which peaked at 11.1% in October 2022 would fall back to just 2.9% in the fourth quarter of this year. They sent me some special stuff to take when reading their forecasts so excuse me while I take a drag. Aah, that’s better. Now I’m starting to see how rosy everything looks. Wait a minute, what’s that big pink creature passing by my window?