Tuesday, 23 April 2013

UK borrowing down - good news?


Today the chancellor announced a fall in the UK deficit, a figure of £300 million. While undoubtedly a large amount, this isn't necessarily good news.

The first problem is the word deficit. Many think deficit = debt. Instead deficit is just the shortfall. That means the increase in our debt has fallen, not the debt itself. That would be like me borrowing £20,000 from the bank this year, and £19,999 next year then saying I've been financially prudent.

The fact is, the UK spent £120.6 billion more than it earned in taxes.

Yes £120,600,000,000.00. Looks a lot bigger when we don't abbreviate the 0s to bn, doesn't it?

To put that in perspective, the UK net debt is now £1.2tn, or £1,200,000,000,000.00.

That's 75% of the total GDP. So if every person in the UK put 3/4s of their income into debt repayment we'd be clear in a year. Obviously that's not realistic, and our debt is likely to increase further over the next few years: Even Osborne says so.

Part of today's fall is down to the windfall from selling off licences for the 4G mobile spectrum, but the figure ignores the huge liabilities the government has taken on from the Royal Mail which has a bloated backlog of pension liabilities that it can't meet.

That brings me to the second reason it's not time to cheer: All the figures are estimates, so will likely be revised. There's often an element of massaging in the end of tax year figures. Payments out can be delayed to shift them beyond the deadline which artificially brings down the 2012/2013 figure at the expense of the 2013/2014 figure.

Now, you're probably wondering what this all has to do with publishing/ writing. My answer here is simple: Authors create a product. Economic value attaches to providing a product, or a service. Making things and selling services are the only activity that generates a real return. Bankers, wholesales etc don't add to the product, they simply take a cut out of the middle. The most efficient transactions are where the buyer contracts with the seller. Shorter supply chains mean efficiency, and transparency. For authors the chain is remarkably simple. It's usually Author >> Amazon >> Reader. It could also be Author >> Smashwords >> Amazon >> Reader.

Being a writer is like being a small business owner. You create your works, then try and sell them. No paper pushing, very low interference from middle men. If it's good, and you market well then it sells. If you fail at either quality (relative to price) or marketing, you flounder. Authors are risk takers. It might not be a huge financial risk but publishing is a risk. To your time, to your reputation and often to your money.

The market decides if we sell. That's hugely empowering to buyers. If they don't like an author, it's very easy to avoid them. With review systems, they can give feedback that others can read too (though any such system is open to abuse).

I'd like to think that these small efforts add up. We can't dream up coal, nuclear fuel or food but imagination does provide an income for many authors. Supplementary income can be as essential as a day job.

I guess what I'm saying here is Thank You. Thank you for creating something I want to read. Thank you for taking the chance and putting it out there for readers to praise or criticise as they see fit. But mostly, thank you for contributing to the economy. The future of all countries depends on having more of what other countries want, than we want from them. If you have more to sell than you need to buy then you'll always be good in the long run. Let me tell you, entrepreneurs are in short supply, and authors truly are entrepreneurs.

1 comment:

  1. It is a kind of magic isn't it? Almost like creating something from nothing. What's perplexing is why our government add VAT to ebooks, and not books made from paper - surely ebooks are greener, something the government keeps banging on about. How much revenue does this provide, and where how is it spent?

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