Members of the UK200Group of independent chartered accountancy and lawyer firms have today commented on reports that Chancellor George Osborne will use his Mansion House speech tonight to signal a return to what has been called “Victorian age” public finances, including permanent surpluses and government borrowing permissible only in "exceptional circumstances".

David Whiscombe, director of tax at UK200Group member firm BKL

“Extremes breed extremes. If you’ve ever been in position where you are swamped by debt, a resolution never to borrow a penny piece ever again is almost rational. 

“A more balanced approach to public finance is to recognise that proper management of the economy involves budget surpluses in some circumstances and budget deficits in others: the important thing is keeping them in balance over the long term. 

“Given the enormity of deficits in recent years, that must mean aiming for surpluses for the foreseeable future.”

Jonathan Russell, partner, UK200Group member ReesRussell

“If, say, every government and every person in the world decided they would all spend less than their income and money would only be borrowed to buy capital items, which would always be repaid within the life of the assets, and we who have existing debt would repay that as well – all of a sudden we all essentially become net savers.

“What a wonderful situation. Debt would slowly go away, everyone would have a sum for a rainy day and we would all be happy. The problem? If everyone is saving spending would go down, business incomes would go down, business profits would go down and therefore the ability to pay wages would go down.

“Because demand is down prices would have to drop, so we would have deflation; the value of our assets would go down, so those with mortgages might end up in negative equity and have their mortgage companies asking for increased repayment rates. We would all have to accept a fall in living standards.

“I am not against governmental control of its spending but if the economy is to grow money has to be spent by someone.

“There is therefore an argument that government should spend more to increase economic growth, which in turn increases tax revenue. But many of us remember Gordon Brown talking about investing for the future and where did that get us?”

Duncan Montgomery, Tax Partner at UK200Group member firm Whittingham Riddell LLP

“This and other measures seemed to be designed to make it difficult for a government to change course, particularly if with by-election losses the Conservative majority fails to hold in this parliament.

 “Economically, paying down debt to sustainable levels is crucial, both for countries and businesses, and getting the debt to equity ratio in a business right needs proper controls in place. SMEs do need up-to-date information monthly on performance, (simple management accounts are not enough for busy entrepreneurs) as without it they can end up in special measures of their own.”

 

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Established in 1986, UK200Group is the leading mutual professional association in the UK with some 150 offices of quality-assured member accountancy and lawyer firms throughout the UK totalling over 550 partners, 150,000 business clients and global links in over 50 countries. UK200Group provide services and products that are designed to enhance the business performance of its members.  Telephone 01252 401050, email admin@uk200group.co.uk or visit www.uk200group.co.uk 

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