almost time to visit a rockin' roller coaster?

Yesterday, I could hear the budget speech coming through on a distant radio. It was the braying and hee-hawing sounds that gave it away. Parliament in action.

Curious that just a few weeks before the next election we get something like this, with all its political loops. Although, come to think of it, the opposition response was rather basic, resorting to "don't believe it" type phrases.

Ozzy riffed through a barrage of statistics which rock 'n roller coastered from GDP to church roof funds with some penny-off-a-pint assumed crowd pleasers in the middle section.

Has he tried beer in London lately? A penny off a pint of London Pride would take it from, oh, £3.80 to £3.79. A 0.26% reduction. The first third of every pint still goes to the Government.

That's the trouble with the way the budget was presented. It's not just what's said, it's also what gets left out.

Even the Office of Budget Responsibility published some quick spreadsheetery which has that 'then a miracle occurs' look about some of the numbers (as well as a few odd-looking adjustments in 2016?)

Here's a version of the statistics that can build one of those sets of roller coaster graphs. They are on Page 202 of the post budget report along with 'uncertainty ratings'.

It's the OBR's table and below is my quick graph. Note there's plenty of wiggle in there, too and even more if you look at the fan graphs in the OBR report.

The OBR numbers are the surface of a bigger set which lead to the UK budget deficit. It's around £1.4tn (£1,400bn) which is about the same as the UK total GDP. The Public Sector Net Cash Requirement (PSNCR née PSBR Public Sector Borrowing Requirement) to plug the gap in finances each year is around 11%-12% of GDP.

This deficit represents the number that the Chancellor needs to remediate. It's also where the miracle needs to occur. I plotted the figures from Parliament.uk a few weeks ago.

Now we can add a couple of vectors to the graphic, including a tweak of the revised budget figures. I've looked at prior successful remediations, spread over the period starting in 1980.

For simplicity, I've expressed the trend line of the remediation as a gradient in degrees. It's a bit like a dial in Startrek - the further it is yanked, the more chance the engines might explode.

In the 1980s the remedy was around 14°. In the 1990s it reached 32°. The current remedy since the peak in 2009 is around 38°.

Our Chancellor wants to push this up to around 52° (my green arrow) to remove the deficit in 2018.

So where are the big numbers coming from? There must be a lot more happening than the figures highlighted in the OBR analysis of the budget.

Of course, the spreadsheet hides the fact that much can change in the five year forward period.

The graph already has one of those optimistic forward bursts of gain (shown in 2017-2018), where in a trippy Planet Caravan scenario the dial has to move right up to 63° to achieve the required numbers.

It almost certainly relies on there being so many other changes that these figures will get quietly adjusted over the next 18 months.

I also notice that using the already steep 38° line, it shows that the fix won't have occurred by the end of 2020. Oops.

Perhaps I'm being paranoid? Or maybe Ozzy has hidden more in the rat's salad of figures? And perhaps that is really a 'vat' of salad?

VAT cut latest

The lights have been on all night at the Treasury, where calculations for Chancellor Darling's next steps are being processed in large spreadsheets. The word is that VAT may be reduced along with some other measures.

A VAT reduction from 17.5% to 15% would remove the "temporary increase" made in 1991 to compensate for the Poll Tax debacle. Thats a reduction on a £9.99 VAT-ed item to an amazing £9.87, which I somehow think gets lost in the noise.

Such a reduction of some 2.13% in the price of an item requires spending of £469 a week on VAT-able items (eg not food) to save £10. It may chop cash from the Exchequer, but it doesn't make a lot of difference when even a £600 telly would still be £587.23 after the adjustment. The £13 is probably not the dealbreaker.

Let's try 12.5% VAT, a reduction of 5%. That's more of a 'UK Economy Winter Sale' level, but still requires the traders to pass on the savings, rather than have reasons to somehow round up ticket prices. That £9.99 becomes £8.50+1.05 = £9.55. When retailers are already knocking off 20% in pre Christmas sales, the 45p does not seem all that exciting.

How about a present? A Christmas Xbox would make an interesting example: A few weeks ago they were £169, then all the retailers passed on the manufacturer reduction which saw the price drop to £129 - forty quid less. A VAT reduction of 5% (ie to 12.5%) would take another circa £6 off of the price. Not enough to even change the second digit - £129 becomes £123. Hmm.

Having just flitted through Heathrow, the effect of pseudo 'No VAT' is more pronounced. The same item would become around £109 - see tourists buying up cheap items in the airside stores.

I suppose in the absence of a December VAT holiday, we will have to find other ways to amuse ourselves with the remaining banknotes.