Funtime! UK Government Budget for 2013

Oh, the glory of Public Policy! They provide you with sweet charts, straight down your University Email!

Budget Deficit for 2013:                £108 bn

National Debt:                              £1,23 trillion (that is: £1 230 000 000 000)

National Debt/GDP 2013               90%

Today we're going to have some fun. If you're allergic to numbers - don't worry, I'll explain core issues as well as I can. I know that £108 billion, for example seems like a VERY large number to most people, but we're talking about a country with some 64 million inhabitants; numbers add up quickly. 

My best tip: treat it as any other amount you're used to spend; £1,50 on bread at Waitrose, a can of milk at tesco for £0,49 - or your Mobile Phone Pay Plan for £25/month. It's like your own economy, just a whole lot bigger and with some pecularities.

Budget
A budget is a plan for the future. That is, the exact numbers for the year are not available, because 2013 isn't over yet. That is why I'm using the Government Plan, i.e the budget.
Government Budgets are normally made on yearly basis; the chart above refers to the UK budget for 2013. It includes all the spending the UK Government is responsible for during a year; police, health care systems, schools, military etc. 

Essentially, they're like any other budget; large international companies, households, the small conveniece store down the road. Money coming in, Money going out. 

The above chart is ONLY money going out (Government Revenue will be addressed later). For now, it'd suffice saying that the Money coming in is £612 billion. The attentive reader notices that the numbers don't add up: That leads us to Deficit.

Deficit

What is it? More money going out than money coming in. Typically, those numbers never do add up for governments. Either there's a surplus or there's a deficit - it's a hard work hitting the exact equilibrium. In itself, this is not a problem as long as it is balanced with surplus other years, or if they're generally small. Whenever there's a deficit, the Government sell UK Bonds (that is: taking up loans) to investors, pension funds etc to finance that deficit; likewise, when there's a surplus the Government pays off parts of the national debt.

National Debt

The National Debt is the total sum of all surplus and deficits had going back in time. Every year with a deficit adds to the debt; every year with a surplus reduces it. The UK national debt is currently about £1,23 trillion, or about £20 000 for every citizen. Here's an illustration for you. 

National debt is normally compared to GDP levels, resulting in a % of GDP. In Britain's case the debt of GDP is something around 90%. US, whose debt crisis is appearant is around the same levels, as are the European counterparts France and Spain. Greece, Portugal or Italy are even worse with numbers of 110-130% of GDP. On the other end of the spectra we have Estonia with an astonishing 9% of GDP and more normalized levels in Scandinavia with 38-45%. The Economist has a nice tool to look at. 

Pretty straight forward. Just like a normal guy's economy, but with a whole lot larger numbers.

A lot of numbers. SO WHAT?

Interesting stuff happens when you start comparing such numbers. The discussions you might hear about in media revolves around the question of just how large the debt can become before it actually is a problem. Some, like the infamous Paul Krugman and other post-Keynesian says that there is no such problem. It is customary for countries to take on debts in recessions, with following surplus in good times, all in according with the almighty Keynesian economics.

But let's take a good look at other posts in this budget. A good half of it goes straight to health, care for the elderly, disabled, low income etc. That is, every 2nd £ you pay in taxes is either put into health care or redistributed to the poor/elderly/disabled. I strongly oppose such measures, but that's beside this post. Interest rate pays for having the national debt, equals that of police, courts and housing, or more than half of all money spent on education. Or, interest payed for this gigantic loan equals roughly £800 per citizen each year. And every year, this gigantic deficit produces a higher debt, that's passed on to the future. Meanwhile, those £800 is growing exponentially. What will happen once interest-rates are normalised, you reckon?

Have a look around, compare numbers and see what's going on in other countries. You can learn a whole lot about what the government is doing with the tax money it steals from you each month. Here you've got a brief overview.