Week 12, 2013: UK Government Finances

Summary: The UK Budget is due this afternoon, so we have updated our annual real per capita government revenue and expenditure graph.  While real per capita expenditure is down, revenue is down by more, meaning the deficit per person in 2012 was higher than 2011, and represents the third highest post-war real per person deficit.

What does the chart show? The red line shows total real expenditure payable by central government per capita, in 2012 prices.  The blue line shows central government receipts receivable (mostly taxes), also per capita in 2012 prices.  The grey bars show the real deficit per person (expenditure minus revenues).  A negative deficit represents a government surplus.

Why is the chart interesting? As you can see, central government revenues and expenditure per person have been rising roughly in line with each other for the past fifty years.  In response to the financial crisis in 2008, there was a big divergence as tax revenues fell and government expenditure rose sharply.  Since the peak in 2010, real government expenditure in the UK has fallen to almost exactly £10,000 per person.  However, revenues have also been falling in real terms, and in 2012 the real deficit went up by £144 per person when compared to 2011, to the third highest post-war deficit in real per capita terms.  This is the bleak situation facing George Osborne today as he prepares to give his Budget speech.