The 4 key charts you need to understand the challenge facing the Chancellor, in the 2021 budget
In the budget, the Chancellor has to decide both what to spend the money on and where to get it. So first off all, let's look at how the public finances are funded - in simple terms where all the money comes from.
1 - SHOW ME THE MONEY: Here is a 30 second Tetris-like video to show you how much the Chancellor gets from Income Tax, Corporation Tax, NIC and Vat etc
So this is the jigsaw or Tetris-like puzzle the chancellor has to put together, changing the size of each block to reflect his political and economic goals.
I created the chart and the video but the numbers come from the House of Commons Library report - 'Tax Statistics: An Overview'. I read not - so you don't have to
2 - In A Deep Hole: The economy is not only in a recession, (see my small video on the curious history of the definition of a recession HERE) but we have experienced the biggest decline in economic activity in over 300 years. So the scale of the problem facing the Chancellor and the country, is immense.
3 - Borrowing: We have borrowed huge sums of money recently and the figures are likely to get bigger before they get smaller. At some stage the debt has to be repaid.
It seems sensible to measure the debt as a percentage of the size of the economy. That way we should get a picture of the relative size of the debt burden. Richer countries can afford to borrow more - so the following graph relates our debt to the country's GDP at the time the debt was borrowed.
4 - Spend, Spend, Spend: So far, so worrying. The economy is in the worst position it has been in for centuries and debt levels are very high - so there's plenty to be concerned about.
Time for some good news though. If you were ever going to spend through borrowing, now seems a rather good time to do it. That's because interest rates are so low, that it's actually quite cheap to borrow.
I have covered many budgets and during his speech the Chancellor always throws a steady flow of numbers out, which are often confusing and it takes the experts a number of days to make proper sense of them. However, I hope the above 4 charts will help set both the challenges facing the Chancellor and the steps he takes in his budget, into some sort of context.
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