printAcross the pond, U.K. Chancellor of the Exchequer George Osborne is singing from the Bush and Obama hymn sheet. A neo- Keynesian naturally, Osborne is intent on excessive spending as a model of economic growth. What better way than a housing bubble to bring about that brief burst of spending before the bust?
Tightening credit conditions and foreclosures signal to this man (counter-intuitively, of course) that it is time for the debt-laden borrower to borrow more money he can’t repay; that it is time for those who do not spend money they don’t have, to subsidize those who do.
It’s all good, promises Bloomberg.com:
Osborne yesterday pledged 3.5 billion pounds ($5.3 billion) to help buyers of new homes with loans of as much as 20 percent of the property’s value, broadening an existing program beyond first-time purchasers. He also announced a plan to guarantee as much as 130 billion pounds of new mortgages to fuel demand from purchasers with limited cash for a deposit.
At least the chancellor delivered a 2013 budget. At a glance, here are “the key points of Chancellor George Osborne’s Budget,” via BBC News (a doff of the hat to our friend in the UK):
FUEL, ALCOHOL AND CIGARETTES
September’s 3p fuel duty rise scrapped
April’s 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p
Annual inflation +2% rise in beer duty to be ended but “duty escalator” to remain in place for wine, cider and spirits
Cigarette duties unchanged – continuing to rise by inflation +5%
INCOME TAX
Limit at which people start paying tax to be raised to £10,000 in 2014 – a year earlier than planned
HOUSING
Shared equity schemes extended, with interest-free loans for homebuyers up to 20% of value of new-build properties
Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014
STATE OF THE ECONOMY
Growth forecast for 2013 halved to 0.6% from 1.2% in December
Office for Budget Responsibility watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.
BORROWING
Borrowing of £114bn this year, up from previous £108bn forecast
Borrowing set to fall to £108bn, £97bn and £87bn, £61bn and £42bn in subsequent years
Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.6% in 2016-17
SPENDING AND PAY
Most government departments to see budgets cut by 1% in each of next two years
Schools and NHS will be protected
£11.5bn in further cuts earmarked in 2015-16 Spending Review, up from £10bn
1% cap on public sector pay extended to 2015-16 and limits on “progression” pay rises in the sector
Military to be exempt from “progression” pay limits.
Proceeds of Libor banking fines to be given to good military causes, including Combat Stress charity
JOBS
600,000 more jobs expected this year than at same time last year
Claimant count to fall by 60,000
TRANSPORT AND INFRASTRUCTURE
An extra £15bn for new road, rail and construction projects by 2020, starting with £3bn in 2015-16
HELP FOR BUSINESS
Corporation tax to be cut by 1% to 20% in 2015
New employment allowance to cut National Insurance bills cut by £2,000 for every firm
450,000 small firms will pay no employer National Insurance
Government procurement from small firms to rise fivefold
Tax relief for investment in social enterprises
Stamp duty axed on shares traded on growth markets like Aim.
Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes
ENERGY AND THE ENVIRONMENT
Tax incentives for ultra low-emission cars
Pottery industry in Midlands to be exempt from climate change levy
Tax allowances for investment in shale gas
INFLATION
2% Bank of England inflation target to stay in place
Bank remit to be changed to focus on growth as well as inflation
PENSIONERS
Single flat-rate pension of £144 a week brought forward a year to 2016
Cap on social care costs confirmed
FAMILIES
20% tax relief on childcare up to £6,000 per child from 2015
£5,000 payments for those who lost money on Equitable Life policies bought before 1992. Extra money for those on low incomes