Question from James May

How has this deficit come about?

In 2009/10 the government estimates it will receive from taxes £490 billions.

It estimates it will have spent around £660 billions (of which £330 billion on wage and agency costs).

Therefore the Deficit 2009/10 is £170 billions.

National Debt

At 30 April 2009 this was around £600 billions.

For 2009/10 add £170 billions

Therefore the Estimate of National Debt at 30 April 2010 is £770 billions

Starting point for deficit elimination

1          Public sector wage costs (i.e. wages themselves, employers’ pension contributions, employers’ national insurance) are around £330 billion.

2          Public sector wages are around 5% higher than the private sector on average.

3          Public sector employer pension contributions are typically 14-18% of salaries.  Private sector employer pension contributions are typically 4-6% of salary, say an average of 5%.

4          Number of employees in the public sector:

in 2001 7 million

in 2007 8 million.

5          Unemployment in April 2010      2.5 million

Unemployment in April 2007      1.6 million

Over 3 years the increase is around 900,000 (entirely in the private sector where employment among British workers has fallen over 10 years by 200,000).

Many private sector workers have opted for wage cuts and/or 4 or even 3 day working weeks to keep their jobs and firms going.

UKIP’s View

6          The public sector is just too heavy a burden for the private sector to bear.

7          This burden must be reduced in the interest of both economic necessity and equity between the public and private sectors.  Nothing else will match the scale of the problem.

8          UKIP therefore proposes no tax rises but expenditure reductions by the public sector (which is paid for by taxes on the private sector and on individuals as taxpayers):

Annual Expenditure Reductions by 2015

(These do not affect services delivered to the public, but merely restore productivity to where it was in 2007.)  Figures are constant £s per year.

(i)         Reduce top public sector salaries by 2% per annum for 5 years and medium salaries by 1% p.a. for 5 years. Low salaries will not be reduced. This will save £16 billion per annum by 2015.

(ii)        Reduce public sector employers’ annual contributions to employees’ pensions to the average in the private sector over 5 years.  This will save £33 billion.  No changes will be made to pensions already being paid.

(iii)       Reduce public sector employee numbers to 2001 levels by natural wastage (2.5% per annum).  This will save £33 billion.

(iv)       Capital cost savings of 2% give £6 billion per year by 2015.

Total annual labour & capital cost savings by 2015 £88 bn

(iv)       Benefits to be paid only to UK citizens over 21 and residents who have paid rates and taxes for 5 years.  This will save £5 bn.

(v)        Consolidate housing and other benefits into a single cash benefit, saving £10 bn p.a.  No pensioners’ benefits to change.

(vi)       Stop the UK’s annual subscription to the EU.  This will save £10 billion a year by 2015.

(vii)      Abolish most Quangos and all Regional Assemblies, reduce admin overheads due to simpler tax and benefits system (£5 bn).

Total repeat annual savings by 2015 will be £118 billion.

(viii)      One off savings: ID cards £10 billion, NHS database £5 billion.

Total annual savings by 2015                    £118 billion (A)

Plus one-off savings 2010-12                       £15 billion

B       Increasing Income by 2015

(i)         UKIP’s Manufacturing expansion programme (see Jobs & Economy leaflet) will add around £80 billion of output on which taxes paid will give £27 billion. The increased private sector (about half a million) will absorb employees released from the public sector of around the same number.

(ii)        There will be some general expansion in the economy of about 10% over 5 years (some generated indirectly by (i) above) giving around £140 billion on which taxes paid will give £49 billion

Increased real terms income p.a. to government £76 bn (B)

(C) Cost of UKIP’s long-term programmes p.a. £20 bn

(These are defence equipment, energy, flood and coastal protection, transport, manufacturing expansion.)

Net reduction in annual deficit by 2015: A+B-C = £174 bn

Surplus by 2015 is £174 bn less £170 bn = £4 billion

Estimated Total National Debt by 2015

At April 2010 it is £770 billions

Increase 2010 to 2015 is £420 billions

Therefore total National Debt by 2015 is £1190 billion

(This is much lower than any of LibLabCon’s projections (£1,400-1,600 bn) just for halving the deficit!)

A letter to the Times which was published on 20th January 2003.

Ann Widdecombe’s defence of her proposed system of secure holding centres for all asylum-seekers (letter, January 16th) is sound as far as it goes.  It does not, however, take the measure of the truly desperate situation which nearly six years of Labour Government has brought about, starting with the abolition of the primary purpose rule and other reversals of the previous Government’s policy.

Asylum and immigration have been confused, deliberately so in my view, by the supposed labour shortages in the British economy.  With 15 million currently unemployed, 155,000 jobs lost in manufacturing last year (Business, January 16th), many thousands currently being made redundant in the IT and financial sectors, and possibly one third of 16-year-olds (around 250,000 per year) according to the Department for Education and Skills ill-equipped to participate fully in the economy, we have in this country not a labour shortage, but a massively unbalanced labour force.  The few hundred degree-holders among the hundreds of thousands in the asylum/immigration queue are very unlikely to have the practical skills this country really needs.  The overwhelming majority will not even speak English.

A complete moratorium on non-patrial immigration and asylum for, say, five years is the only measure which will allow the backlog of what I estimate to be between 500,000 and a million asylum-seekers and dependants to be cleared.

The Government could also use this five-year breathing space to enact enforceable laws for asylum and immigration drawn up after consultation with the British people, preferably in conformity with a new international convention to replace the outdated 1951 Convention on Refugees, but if necessary without it.

A letter to the Editor of the Daily Telegraph which was published on 17th January 1985.

Mr Richard Fenning’s letter (Jan. 16th) about VE day commemorations is typical of a spirit in this country which disapproves of any British success.

Behind the polite smiles of international summits and vapid talk of European co-operation, which Mr Fenning commends, is the hard fact that Japan and West Germany, the defeated enemies of 1945, constitute today as mortal a threat to the survival of this country as they did in 1942.

The manufacturing trading deficit which this country suffers from, and which is the fundamental reason for both the special weakness of the pound and our specially high unemployment, is in turn entirely attributable to the vast imbalance of our trade in manufactures with these two countries.

Until people, including politicians of all shades of opinion recognise that behind the niceties of diplomatic convention we are engaged in a ruthless war for economic survival, with these two countries in particular, nothing will come right for our country.

Only an attitude which accords national economic success the same primacy accorded to military success in 1914-18 and 1939-45 will arrest the shameful slide of the last 25 years.

A letter to the Editor of the Daily Telegraph which was published on 16th October 1984.

Mr Bernard Gosden’s letter on dealing with unemployment (Oct. 11th) seems a message of hopeless defeatism.

Mr Gosden’s suggestions really amount to either simply renaming unemployment by calling it education or retirement, or alternatively discouraging employment by (incredibly) raising taxes on companies and individuals.

The whole tenor of his and similar proposals proceeds from the assumption that there is a fixed amount of employment, so what we should do is spread it out more fairly.

The fact is Britain as a country simply does not produce enough manufactured goods.  Many of the present Government’s measures for improving the climate (training, start-up incentives and so on) are sound in themselves, but they do not tackle the central defect in our economic situation and that is the wholesale retreat by business from large sectors of the manufacturing economy.

British business has allowed itself to be largely expelled from whole areas, particularly where high quality precision manufacture is required: machine tools, plastics processing equipment, office equipment, cameras, motor cycles, half of its domestic car market, and so on, to the extent that we are now net importers of manufactured goods.

Here lies the main challenge: reconquer these markets.  This will not be done by the 130,000 or so one or two-man businesses which are born each year (balanced almost exactly by 120,000 deaths) worthwhile though they are, nor are existing large businesses likely to be net providers of new jobs.

The only way these markets will be reclaimed, and generate the jobs which go with them, is by the formation of new companies of sufficient initial size to recruit management and engineering talent commensurate with the task.  No sophisticated research or time-consuming innovation is needed – the target is the production of goods which are similar to imported products, but just a little bit better in quality and design.

The proper sources of capital for such large sacale enterprises are the banks.  This should be seen as an opportunity for them to play a part in the renaissance of Britain similar to that played by their counterparts in Germany and Japan in the fifties and sixties.

A letter to the Editor of the Daily Telegraph which was published in February 1983.

Your leading article and the commentary on the City Page (Feb. 21st), like many others, follow the oft-repeated view, also built into most if not all models of the British economy, that there is little if anything to be done to revive the British economy without the long-awaited upturn in the United States economy and revival in world trade generally.

But does this view not lay too great a stress on foreign trade as virtually the only source of inflation-free growth?

With anything from 40 per cent to 90 per cent import penetration in the major categories of the manufacturing sector (valued at about £55 billion annually), it is clear that a determined across-the-board attack by British manufacturers on the British market, aided by a Government employing the same measures to restrict imports as our trading partners do, would be the single biggest contributor to reducing domestic unemployment.

A 10 per cent reduction in manufacturing penetration would correspond to about 300,000 direct jobs alone, even allowing for present under-used capacity.

It is usually objected at this point (as implicitly in your City Comment) that the resultant strong pound would make imports cheaper and exports dearer again, thus largely offsetting the quoted employment gains.

But this objection ignores the fact that the United Kingdom, alone among the major industrialised economies, can, if it wants to, control the trading balance outside the manufacturing sector, without using fiscal means, by varying the extraction rate of oil.

Oil at the present rate of extraction is the great exporter of British manufacturing jobs.  One day’s production of North Sea oil shipped to West Germany keeps 1,000 West Germans in jobs for a year just on converting a fraction of that oil to chemical and plastics products, a large proportion of which are then shipped straight back to Britain to contribute to the import penetration quoted above.

In fact, the oil extraction rate should be seen as a control lever in the economy which we have never had before.

With central government revenues now under control, the opportunity exists to use this control to engineer an import substitution-led revival of the British economy, to a considerable extent independently of the decisions and difficulties in the economies of our principal trading rivals, the United States, Japan, West Germany and France.