The Office for National Statistics has revealed that the UK's budget deficit in the 2012/13 financial year came in at £120.6 billion. As this is just £300 million less than the £120.9 billion shortfall for 2011/12, the Chancellor claims that he is delivering on his 'Plan A' of reducing government overspending.
Then again, what is £300 million when compared to total Government expenses? With spending predicted to be £720 billion in 2012/13, it's a mere 1/2,400th of total spending. To put it another way, this £300 million saved accounts for a little over 3.5 hours of Government spending.
Even £300 million is a tiny drop in a very big ocean!
How the Government taxes you
With figures in millions, billions and trillions being thrown about, it's very hard to get your head around these numbers.
To make things clearer, I'm going to break down the Office for Budget Responsibility's (OBR) forecasts for this financial year into numbers that make sense to individual households. Here we go, starting with predicted tax revenues:
The first thing to note is that not all of these taxes are personal taxes. Corporation tax and business rates are levied on businesses, so they don't really lend themselves to per-household analysis.
Nevertheless, the total taxes collected by HM Government amount to more than £23,500 a year for each of the UK's 26 million households. Of this total, more than a quarter (25.3%) comes from income tax, which averages out at close to £6,000 per household.
The second biggest tax in Britain is National Insurance, worth over £4,100 per household, or more than a sixth (17.5%) of total taxes. The UK's sales tax, VAT, averages to almost £4,000 per household, again more than a sixth (16.8%) of tax revenues.
Other major personal taxes include excise duties (including taxes on alcohol and tobacco) averaging more than £1,800 per household, and council tax, costing over £1,000 per household.
How your taxes are spent
As we've seen, our Government raises huge sums in taxes in order to run the country. However, its spending vastly exceeds its income, as this spending table shows:
The first point to note is that Government spending should average nearly £27,700 per household this year. This is over £4,150 a household more than is collected in taxes, which explains why the UK has one of the highest budget deficits in the world. In effect, the Government is borrowing from Britain's future to spend an extra £4,150 per household today.
As for the breakdown of this spending, Britain's biggest bill by far -- accounting for over three-tenths (30.6%) of the total -- is social protection. This includes various types of welfare benefits for people who are out of work or disabled, but more than half of this total goes towards paying State Pensions.
The next biggest bill is healthcare (the National Health Service, general practitioners and so on), which costs nearly £5,300 per household. Education takes third spot, costing over £3,700 per household.
The fifth-biggest bill, at more than £1,500 per household, is interest on the UK's debt pile. Since 2008, our national debt has exploded, more than doubling to £1,186 billion.
Next comes defence, costing each household over £1,500, followed by personal social services (nearly £1,200 a household) and public order and safety (including policing), also costing close to £1,200 a year.
How the Government borrows in your name
With Government spending exceeding taxes by over £4,150 a household, how does HM Treasury fund this spending gap, known as the 'budget deficit'?
The simple answer is the UK borrows from international investors by issuing UK Government bonds known as 'gilts'. In this financial year, the total shortfall is estimated to be £108 billion, almost all of which the Government will borrow by issuing an average of £9 billion of new gilts every month.
All pain and no gain
What you've seen today is that, despite so-called austerity measures, Government spending will exceed taxes by £108 billion this year. In effect, the Treasury will borrow £4,150 in 2013/14 from each household's future -- including yours.
One way to think of this shortfall is for every £5 the Government raises in taxes, it spends nearly £5.90. In effect, this represents an overspend of nearly a fifth (17.6%) for 2013/14. Although higher taxes and restrained public spending will eventually bring down future budget deficits, Britain is highly unlikely to balance its books for at least another five years.
So we can expect another few years of hardship ahead. Only when our economy recovers and growth resumes can we once again look forward to rising living standards.