Queen receives an extra £5 million from the taxpayer

By Derek Van de Ven

Her majesty the Queen has been granted an extra £5 million per year, as a result of new legislation regarding the taxpayer’s contribution to the Queen’s bulging finances. The new rules, called the sovereign grant, mean that the Queen will receive 15% annually of the profits generated by the Royal Estate. The money she receives for the financial year 2013-14 comes from the profits generated by the Royal Estate profits from the financial year 2011-2012, which came to £240.2 million. The total amount she will receive was raised from £31 million to £36 million, a hefty £5 million tax-funded increase. The previous year’s amount, £31 million, does not include the £1 million donated to the Queen to help cover the costs of running the Diamond Jubilee. The new system replaces the old system of the civil list and grants-in-aid, which gave the monarch a set amount of money every year and was not reliant on a percentage of profits.  The BBC has reported that the cost to the taxpayer of the Monarchy has been rising slowly but steadily since 2010, at about £1 million per annum. However this year the costs took a much higher jump due to the changes in funding.

The money is supposed to help the Queen fund the costs of being a Monarch. This includes travel costs, both within and outside the United Kingdom, and official costs of Royal engagements such as public openings and meeting foreign heads of state. It is estimated that £10 million pounds is spent yearly on the wages for the Queen’s Royal chefs and footmen. It is expected that the costs of Her Majesty’s security would be higher but these figures have not been released.

A Spokeswoman for Buckingham Palace said that the majority of the new funds will be spent on maintaining the grounds of all the Royal Estates around the UK. She argued that the money received by the Queen has decreased by 15% in ‘real terms’ over the last five years and this has caused a backlog of work to be done on the Royal Properties, hence why the money is needed. She added further that, by undergoing such restoration, ‘works will see funds spent in the real economy creating work and opportunities.’ It is poor timing however, that the new legislation comes during times of austerity in Britain; the highly unpopular ‘bedroom tax’ could see some of Britain’s poorest families losing £1000 a year, not including increased funds for the monarchy.

Whether or not you support the monarchy it is hard to not feel some anger at the new rules. Without even any public money the Queen and her family would still be ridiculously wealthy. It is therefore questionable as to why we, the taxpayers, should give her a penny at all when much more important government departments are having their budgets cut. It is thus hard to justify such drastic spending when in reality the money going to the Queen is unlikely to come back to us – taxes in the UK are supposed to help fund the key functions of the state – the NHS, education, defence, police and public services. The money is simply not being spent on such things. The anti-monarchy group, Republic, denounced the measures as immoral and absurd. The head of the organization, Graham Smith argued “the Windsors must learn to live within their means like everyone else.” Combined with the £1000 tax cut for millionaires or ‘wealth generators’, it is hard to believe the PM’s pledge that “we are all in this together.”

Cable calls for increased borrowing before budget

By Luke Prescott 

Vince Cable has rebuffed the government’s borrowing record, and has urged the Chancellor to change course and borrow more just two weeks before the 2013 budget.

Cable states that the perils of a sustained lack of capital spending –spending that is funded by Government borrowing – is leading to a slow recovery, and is now a bigger economic threat than a loss of market confidence. An absence of economic growth in 2012, and meagre prospects for 2013 has encouraged Cable to abandon the party line, he says, and instead call for increased government borrowing.

The Chancellor George Osborne regularly cites the low borrowing costs the Government enjoys – despite choppy economic times – as a testament to strong confidence in the Coalition’s economic Plan A. Osborne stressed the borrowing costs were kept low due to retention of the UK’s coveted, but now-lost, AAA credit rating.

The Chancellor has been defiant since the downgrade in late February, downplaying the significance of the failure of the self-set economic test he spoke so much about. The significance is more of political embarrassment than any real change in economic outlook.

And is he right? Probably. It’s likely that the low borrowing costs for are not due to a confidence in the Chancellor’s stewardship of the economy, but of the lack of suitable or secure investment opportunities in the wider economy. Investors are finding it difficult to find suitable places to invest their funds in a zero-growth environment, and are likely to stick with offering low-cost bonds for the Government, whether they change course or not.

Cable outlined key areas for focussed stimulus that would be beneficial to the wider economy, “Target two significant bottlenecks to growth: infrastructure and housing.” Indeed, increasing the depleted affordable housing stock would provide a kick-start to many areas of the economy, and also release much needed disposable income from the tenants of the ever-inflating private rental market – boosting growth in the service sector.

The Deputy Prime Minister, Nick Clegg, agrees with his Lib Dem colleague, but the Prime Minister is unmoved by Cable’s remarks in the New Statesman. David Cameron states that veering from the path set out three years ago, would send the UK economy ”back into the abyss.” The Coalition has been goaded and mocked by the Labour front bench for sticking to their Plan A they say isn’t working and for not having a Plan B to fall back on. Cameron insists this is not the case and has referred to a ‘Plan A Plus’.

The ‘Plus’ is an admission that there needs to be an active push for growth – but to fit around the central plan of reducing the deficit. The Chancellor will outline his budget in two weeks time without the series of leaks that left the 2012 budget in so much disrepute, so we’re unlikely to find out the exact details to the ‘Plus’ until then.

 In his speech, the Prime Minister will emphasise increased exports since 2010, which could be a signal for more quantitative easing in the months to come, most probably, in May 2013.

Usually reserved as economic-shock-treatment, QE cheapens exports and senior members of the Bank of England’s Monetary Policy Committee, including Sir Mervyn King, registered their support for the expansion of the QE programme in the last MPC meeting.

The latest vote, today, suggests the vote was split similarly to the last vote. The pound had fallen earlier, amid speculation of expansion of the QE programme (to less than $1.506), but rose quickly after the MPCs announcement. Speculation, however, will return to the next MPC meeting since the expansion of QE remains very much a ‘live issue.’

Whether the Coalition sticks to Plan A or changes course, the open disputes in the Cabinet are not good for market confidence, nor electorate confidence. Vince Cable’s remarks have been met with dismissal and support from the PM and Deputy PM respectively. This all leaves the economy, and the Chancellor, in a more vulnerable position.

Cable wrong to call for more spending

By Robert Hainault

David Cameron has yet again pledged to get the economy ‘back on track’ while ignoring Vince Cable’s calls to increase spending. He claims that to change tack now would plunge the economy ‘back into the abyss’. I think it’s probably time that we looked at some figures.

Eamonn Butler of the Adam Smith Institute pointed out in October of 2011 that despite general gnashing of teeth about cuts, the government had actually spent more than the previous year. The April-June quarter of 2011 was 1.3% higher than in the same quarter the year before when adjusted for inflation. In fact, despite Cameron pledging early on in his premiership to cut spending on beurocracy, Whitehall spending was 7.2% higher in August 2011 than it was a year earlier.

So, an inauspicious start.

Since then, not much has changed. In 2011 total government spending was £681 billion . Last year it  was about the same when adjusted for inflation. However, what is often overlooked is the interest on the new debt we have incurred. The government spent £90 billion more than it raised. It’s reaction was, as with all previous governments of recent years, to print more money, exacerbating inflation which is a further drain on our national economy and is, in effect, a stealth tax. A tax which leaves people with less money in their pocket, and thus less to spend in the economy.

In 2012 the government paid nearly £51 billion in interest on our national debt. That was twice what they spent on transport and even more than we spent on national defence.

And it’s not getting any better. At the current rate of ‘cuts’ our government will have managed to shrink its expenditure to £668 billion by the year 2014-15 (again, adjusted for inflation), a reduction of only 2.9%. Yet by 2014-15 the interest on our national debt will be £60 billion, and repayments will need to comprise 10% of the budget in order to keep the debt at the current level.

So not only will the national debt not have decreased by 2015, it will be considerably larger. Though the coalition have made some small progress in reducing the deficit, the debt is spiralling out of control, and with economic growth still on vacation there will be no more revenue in 2015 than there is now. In short, we will owe more and have less.

Unless, of course, we can see government spending drastically reduced between now and then, we will not only be unable to keep up with out debt repayments, but we will be unable to stop them growing larger and larger.

What we need, if we are to avert disaster, are sober and serious cuts to the public sector, which still makes up over half of our economy. It is a simple principle: public sector services cost money; private sector services generate money. Getting the economy ‘back on track’ requires only two things: that expenditure should go town and revenue should go up. In order to reduce expenditure public sector services need to be cut to allow the private sector to provide them. This, in turn, generates capital which means more taxable income for the government.

What we must not do is carry on as we are. Worse than that would be an increase government spending. The government is already spending too much on services and too little on debt management as it is. The more we spend on services, the less we have to pay off our debt without incurring yet more debt in order to do it. Though it might be unpopular, the only thing that will save our country from bankruptcy is to drop the secateurs and pick up a chainsaw.

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