Government mishandling of money

I thought I'd add a comment here, to balance things, seeing as there was a remark today on the number of threads about spending on asylum seekers on N&P.

URNBU in your concerns, Sallywally, and I hope you get a few comments in reply, and dont just give up, (as was said yesterday that people do, if no one replies on their thread).

Whatever the past reasons, this government needs to get more of a grip on the issue.
It's a waste of money when a deported asylum seeker takes the money, then blows it and returns again to cost us yet more money. And similar cases.

Similarly taxing private school fees and thereby hitting the wrong people was pretty silly, and the money they've gained through this won't fix the black hole quickly, or save the NHS.
Inheritance tax on farmers - and thereby hitting many of the wrong people again. (I don't know if anyone saw that harrowing story on Countryfile last night? Devastating)

Taxes going up. Etc Etc.

I know the money has to come from somewhere, fair enough. But the wastage and incompetence are outside the bounds of acceptability.

I'm just throwing a few ideas out here, though best not to hold our breath for too many replies, two hours in!

Successive governments ‘mishandle money’ depending on an individuals perspective in my opinion you can’t please all the people all the time and I know that’s a simplistic view but we can debate till the cows come home and not find an acceptable answer to all.

Wastage and incompetence are not the precinct of any one party - think Rwanda "solution."

If we ran our household accounts the way the government finance is run we would all be bankrupt tomorrow all parties do it in different ways.

One major problem is budgets, each department has a budget to spend, if they dont spend it they have failed, so if it’s not needed it gets wasted. There is no sense of economy like we all do in everyday life

David49

If we ran our household accounts the way the government finance is run we would all be bankrupt tomorrow all parties do it in different ways.

One major problem is budgets, each department has a budget to spend, if they dont spend it they have failed, so if it’s not needed it gets wasted. There is no sense of economy like we all do in everyday life

Oh dear.

The fact that national budgets are not run like domestic ones is important here.

Why National Budgets Cannot Be Run Like Domestic Ones

Governments and households operate under fundamentally different rules. While households must live within their income, governments have responsibilities and powers that make their budgeting decisions very different. Here's why:

1. Governments create and control money — households don’t
Households earn income in a currency they cannot issue. A sovereign government, on the other hand, issues its own currency and can create money to finance spending. This means a government cannot 'run out' of pounds or dollars the way a household can, though it can create inflation if it overspends.

2. Government debt is different from household debt
When a household borrows, it owes money to a bank. When a government borrows, it issues bonds, which become assets for investors and the public. Government debt is effectively private sector savings.

3. Governments have macroeconomic responsibilities
Governments must manage the entire economy, not just balance their own books. Deficits can stimulate growth during recessions, while surpluses can cool inflation in booms.

4. Time horizon and intergenerational assets
Governments are permanent and can borrow long-term for investments in infrastructure, education, or health — benefiting future generations who also share repayment.

5. Governments influence the economy itself
Government spending directly affects national income. Cutting spending can shrink GDP and reduce tax revenues, worsening deficits — something households don’t experience.

Summary Comparison .........

Household Budget
Must live within income
National Budget Can issue currency and borrow at scale

Household Budget
Debt is a liability
National Budget Debt is also an asset for savers/investors

Household budget Goal: avoid bankruptcy
National Budget Goal: maintain stable growth, inflation, employment

Household budget: Spending ≠ income
National Budget Spending affects total national income

Household budget: Short-term focus
National Budget: Long-term and intergenerational focus

It is quite complex, but the myth that the two are the same in principle needs debunking because people cast their votes based on this misconception.

The UK after 2008: Why “running it like a household” didn’t work
What happened

After the global financial crisis of 2008, the UK economy shrank sharply. Tax revenues collapsed, welfare spending rose, and the government deficit ballooned. Many politicians argued that the government had to “tighten its belt” like a household, and launched an austerity programme from 2010 onward to reduce the deficit.

The household logic

If your household income falls, you spend less. That seems sensible — you “balance the books.”
But when every household cuts spending, the whole economy’s demand falls. If the government also cuts back at the same time, no one is spending enough to drive recovery.

The macroeconomic reality

In 2009–10, the UK’s problem wasn’t overspending — it was a collapse in private demand. Businesses and consumers were saving rather than spending. The government could have offset that by maintaining or increasing spending to support jobs and income.

Instead, austerity reduced public investment and services, which slowed the recovery:

GDP growth stayed weak for most of the 2010s.

Real wages stagnated.

The deficit took longer to fall, because slower growth meant lower tax revenues.

By contrast, the U.S. and other countries that maintained stimulus recovered faster, even though their debts rose initially.

What this shows

When private demand is low, government spending fills the gap.

Cutting spending in that situation shrinks the economy — and paradoxically makes it harder to balance the budget.

A household can “tighten its belt” without shrinking the wider economy; a government cannot.

A modern contrast: the pandemic response (2020–2021)

When COVID-19 hit, the UK and most advanced economies did not follow the household analogy. Governments borrowed and spent massively to support incomes and businesses.

The result: economic collapse was avoided.

Inflation came later, but the economy recovered far faster than after 2008.

This underlined that governments must think countercyclically — spending more when the private sector spends less, and tightening only when the economy is strong again.

Thanks for those posts, Luckygirl13

Ir's great to know that someone else 'gets it'. It makes me feel less like a voice crying in the wilderness.

The essential difference between a household and a national economy is that a state can create its money, something which neither a household or a business can do.

I find it hard to fully grasp to be honest but it does worry me that people are not aware that there is a difference - people vote on the basis of this misunderstanding so it really does matter.

So many people voted for the conservatives because they saw their austerity measures as being responsible acts when in fact they were the opposite. Thatcher was guilty of equating domestic and national budgets and played on the grocer's daughter idea of financial responsibility.

I find this quite interesting:
"In a downturn, government deficits aren’t a sign of failure — they’re a sign that the government is doing its job."

"In a downturn, government deficits aren’t a sign of failure — they’re a sign that the government is doing its job."

That is because it is the deficit which keeps spare money in the economy. The government taxes some money out of the economy, but it never gets a 100% return on what it has put in. If it did get 100% back in taxation the economy would be stagnant because there would never be any increase to account for inflation and for the always increasing population.

The 'deficit' really represents people's 'spare' unspent money and their savings. Have you looked at 'sectoral balances'?

Inheritance tax on farmers - and thereby hitting many of the wrong people again. (I don't know if anyone saw that harrowing story on Countryfile last night? Devastating)

I saw that and wept, escaped.

Fair enough charging extremely wealthy landowners who buy IP farms to avoid IHT but a family farm, with all the equipment, livestock, land (some of which is probably being rewilded for ecological reasons) can be worth in excess of £1 million and, if we want future generations of farmers to continue feeding the nation, Ms Reeves needs a rethink and fast.

IP up

Luckygirl3

Wastage and incompetence are not the precinct of any one party - think Rwanda "solution."

Yes.

It just washes away down some drains.
Add in the Covid equipment scandals

I don't think Reeves is competent. She is certainly not in tune with the ordinary people of this country.

MaizieD

^"In a downturn, government deficits aren’t a sign of failure — they’re a sign that the government is doing its job."^

That is because it is the deficit which keeps spare money in the economy. The government taxes some money out of the economy, but it never gets a 100% return on what it has put in. If it did get 100% back in taxation the economy would be stagnant because there would never be any increase to account for inflation and for the always increasing population.

The 'deficit' really represents people's 'spare' unspent money and their savings. Have you looked at 'sectoral balances'?

The government is doing its job.

By that you mean spending what the population want.

Which has nothing to do with what money the have to spend

In September they spent 20 billion more than income totaling over 100 billion for the current year, deficit isn’t spare money it’s over spend. The latest figures are Income up 9% spending up 18%.

Why do you think that is good

It makes my blood boil to read that £15b has been spent on housing migrants. What other country puts them up in comfy hotels with free this, that and the other? No wonder so many of them beat a path to our door, forever open to all and sundry.

I think when people compare the running of the economy with running a household budget, I do not think they are talking about the technical points Luckygirl3 mentioned.

I think what most of us mean is that most households keep a sharp eye on their cash flow and capial investments. We do not spend money with the casual profligacy successive governments seem to, throwing money at problems and hoping they will go away, putting money in popular causes, while keeping other sectors short.

Households, most of them, research long and hard before major expenditure and count their pennies over day to day expenditure.

The NHS always wants more money but manages to send people endless letters confirming text messages, cannot cope if aa patient asks to be contacted by email, still less enable a patient to make an appointment in person at the desk when they are at the hospital, so that from the start they have a time and day they can attend and do not waste endless telephone calls trying to sort out unattendable appointment dates.

Your dentist manages this, hairdresser, sometimes even GPs. But the government keeps pouring money into the NHS without ever asking whether they are getting value for money. Few households do anything similar.

I think when people compare the running of the economy with running a household budget, I do not think they are talking about the technical points Luckygirl3 mentioned.

I totally disagree with you, MOnica, I think that is exactly how people think of the national budget; if they didn't they wouldn't be thinking that the government is 'broke' and running out of money. Just see David's response.

I don't, BTW, think that it was Luckygirl who made the technical points, I think it was AI generated (and none the worse for that) and pretty easy to understand if you have an open mind.

I agree that the NHS is shambolic in some ways, but it has been starved of funds for so long that it is inevitable because they can't afford to modernise or update systems. Breaking it into 'competitive. units hasn't helped, either.

The NHS always wants more money but manages to send people endless letters confirming text messages, cannot cope if aa patient asks to be contacted by email, still less enable a patient to make an appointment in person at the desk when they are at the hospital, so that from the start they have a time and day they can attend and do not waste endless telephone calls trying to sort out unattendable appointment dates.

The NHS also contracts out the booking system and letters/texts/emails arrive after the appointment date so that wastes the valuable time of medical staff.

It's a not infrequent occurrence. If it can happen to DH three times in two years (yet another incident of a letter arriving two days after the appointment, a couple of weeks ago) and, as reported by a Hospital Consultant, it happens often, just how much time and money is wasted?

I agree that the NHS is shambolic in some ways, but it has been starved of funds for so long that it is inevitable because they can't afford to modernise or update systems. Breaking it into 'competitive. units hasn't helped, either.

Much of the waste of money is due to inefficiency and operator errors.

escaped

I thought I'd add a comment here, to balance things, seeing as there was a remark today on the number of threads about spending on asylum seekers on N&P.

URNBU in your concerns, Sallywally, and I hope you get a few comments in reply, and dont just give up, (as was said yesterday that people do, if no one replies on their thread).

Whatever the past reasons, this government needs to get more of a grip on the issue.
It's a waste of money when a deported asylum seeker takes the money, then blows it and returns again to cost us yet more money. And similar cases.

Similarly taxing private school fees and thereby hitting the wrong people was pretty silly, and the money they've gained through this won't fix the black hole quickly, or save the NHS.
Inheritance tax on farmers - and thereby hitting many of the wrong people again. (I don't know if anyone saw that harrowing story on Countryfile last night? Devastating)

Taxes going up. Etc Etc.

I know the money has to come from somewhere, fair enough. But the wastage and incompetence are outside the bounds of acceptability.

I'm just throwing a few ideas out here, though best not to hold our breath for too many replies, two hours in!

Well put. Immediate (valid) responses blaming the previous government are to be expected, but that does not excuse the mishandling by the current lot.

MaizieD

^I think when people compare the running of the economy with running a household budget, I do not think they are talking about the technical points Luckygirl3 mentioned.^

I totally disagree with you, MOnica, I think that is exactly how people think of the national budget; if they didn't they wouldn't be thinking that the government is 'broke' and running out of money. Just see David's response.

I don't, BTW, think that it was Luckygirl who made the technical points, I think it was AI generated (and none the worse for that) and pretty easy to understand if you have an open mind.

I agree that the NHS is shambolic in some ways, but it has been starved of funds for so long that it is inevitable because they can't afford to modernise or update systems. Breaking it into 'competitive. units hasn't helped, either.

The government isn’t broke - yet, but it is spending well beyond its means.

It has already borrowings 100% of GDP that’s 2.3 billion, each year the interest on that is costing 15% of the entire government spending. Maisie and Co think that is good and they should carry on and spend spend spend.

A sovereign gonernment has got lots of options it’s not like a household budget because they control the money. BUT when they have already borrowed whole years product lenders want higher interest, because the risk of the currency falling in value.

I’m pretty sure that Reeves will not let that happen, taxes will rise to balance the economy, it’s highly likely they will increase the taxes the promised not to. She will try and fail to get more from the wealthy which means the bulk if the extra will fall on the middle income

Allira

^I agree that the NHS is shambolic in some ways, but it has been starved of funds for so long that it is inevitable because they can't afford to modernise or update systems. Breaking it into 'competitive. units hasn't helped, either.^

Much of the waste of money is due to inefficiency and operator errors.

Well, you can put it that way if you like, but a lot of inefficiency stems from outdated and non integrated systems which are still in place because there isn't enough money to upgrade them.

There isn't enough money because the tories spent 14 years underfunding the NHS and Labour look set to continue that.

The NHS cannot be run on a shoestring.

David49

MaizieD

I think when people compare the running of the economy with running a household budget, I do not think they are talking about the technical points Luckygirl3 mentioned.

I totally disagree with you, MOnica, I think that is exactly how people think of the national budget; if they didn't they wouldn't be thinking that the government is 'broke' and running out of money. Just see David's response.

I don't, BTW, think that it was Luckygirl who made the technical points, I think it was AI generated (and none the worse for that) and pretty easy to understand if you have an open mind.

I agree that the NHS is shambolic in some ways, but it has been starved of funds for so long that it is inevitable because they can't afford to modernise or update systems. Breaking it into 'competitive. units hasn't helped, either.

The government isn’t broke - yet, but it is spending well beyond its means.

It has already borrowings 100% of GDP that’s 2.3 billion, each year the interest on that is costing 15% of the entire government spending. Maisie and Co think that is good and they should carry on and spend spend spend.

A sovereign gonernment has got lots of options it’s not like a household budget because they control the money. BUT when they have already borrowed whole years product lenders want higher interest, because the risk of the currency falling in value.

I’m pretty sure that Reeves will not let that happen, taxes will rise to balance the economy, it’s highly likely they will increase the taxes the promised not to. She will try and fail to get more from the wealthy which means the bulk if the extra will fall on the middle income

TAXES DON'T FUND SPENDING, David.

Spending has to come first, otherwise no-one would have any money to pay their taxes with,