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55-587: The South West of England Regional Development Agency (SWRDA) was one of the nine Regional Development Agencies set up by the United Kingdom government in 1999. Its purpose was to lead the development of a sustainable economy in South West England , investing to unlock the region's business potential. It was abolished along with all the other RDAs on 31 March 2012, with some of its functions being replaced by local enterprise partnerships . The SWRDA covered

110-869: A concern of UK policymakers, particularly on the Left, since at least the 1970s. After Labour came to power in the 1997 election , eight RDAs were created on 25 November 1998 following the passing of the Regional Development Agencies Act 1998 . In subsequent years their scope and powers were enhanced, and a ninth agency, for London, was established in July 2000. The statutory objectives of the RDAs were: They took over responsibility from Government Offices for administering European Union regional development funds. The RDAs were funded from HM Treasury via six central government departments: The funding from these departments

165-481: A deficit. As Professor William Vickrey , awarded with the 1996 Nobel Memorial Prize in Economic Sciences put it: Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital. This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to

220-436: A funded body. Secondly, they sought to influence other stakeholders in the region to take action themselves. Thirdly, they sought to influence the policies of central government where they might impact on the region. The RDAs worked together in a number of areas, with different RDAs taking the 'lead' role in varying policy areas. Additionally, the RDAs jointly funded a central secretariat to co-ordinate this activity. Finally,

275-446: A government would not be able to use tax cuts to stimulate the economy. The Ricardian equivalence result requires several assumptions. These include households acting as if they were infinite-lived dynasties as well as assumptions of no uncertainty and no liquidity constraints. Also, for Ricardian equivalence to apply, the deficit spending would have to be permanent. In contrast, a one-time stimulus through deficit spending would suggest

330-453: A lesser tax burden annually than the one-time deficit expenditure. Thus temporary deficit spending is still expansionary. Empirical evidence on Ricardian equivalence effects has been mixed. The crowding-out hypothesis is the conjecture that when a government experiences a deficit, the choice to borrow to offset that deficit draws on the pool of resources available for investment, and private investment gets crowded out. This crowding-out effect

385-540: A matter of accounting, government budget deficits add net financial assets to the private sector. This is because a budget deficit means that a government has deposited, over the course of some time range, more money and bonds into private holdings than it has removed in taxes. A budget surplus means the opposite: in total, the government has removed more money and bonds from private holdings via taxes than it has put back in via spending. Therefore, budget deficits, by definition, are equivalent to adding net financial assets to

440-679: A property trade show on the French Riviera, £61,000 on its annual staff conference in Wiltshire, plus £28,279 on another staff meeting in Torquay. Further criticism, mostly from Cornwall, said that RDAs were unelected, unrepresentative and unaccountable quangos ; that the area covered by the SWRDA was an artificially-imposed large region and not natural; and called for a Cornish Development Agency to be set up. The South West Science and Industry Council advised

495-409: A time of high effective demand, this may lead to a private sector reliance on credit to finance consumption patterns. Hence, continual budget deficits are necessary for a growing economy that wants to avoid deflation. Therefore, budget surpluses are required only when the economy has excessive aggregate demand , and is in danger of inflation . If the government issues its own currency, MMT tells us that

550-399: Is GDP (production; equivalently, income), C is consumption spending, I is private investment spending , G is government spending on goods and services, X is exports and M is imports (so X – M is net exports). Another perspective on the national income accounting is to note that households can allocate total income (Y) to the following uses: where S is total saving and T

605-486: Is a stock variable since it is measured at a specific point in time. The cumulative flow of deficits equals the stock of debt when a government employs cash accounting (though not under accrual accounting ). The government fiscal balance is one of three major sectoral balances in the national economy, the others being the foreign sector and the private sector . The sum of the surpluses or deficits across these three sectors must be zero by definition . For example, if there

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660-438: Is a foreign financial surplus (or capital surplus) because capital is imported (net) to fund the trade deficit , and there is also a private sector financial surplus due to household saving exceeding business investment, then by definition, there must exist a government budget deficit so all three net to zero. The government sector includes federal, state and local governments. For example, the U.S. government budget deficit in 2011

715-447: Is an accumulation of yearly deficits. Deficits occur when a government's expenditures exceed the revenue that it levies. The deficit can be measured with or without including the interest payments on the debt as expenditures. The primary deficit is defined as the difference between current government spending on goods and services and total current revenue from all types of taxes net of transfer payments . The total deficit (which

770-493: Is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level. Even

825-450: Is induced by changes in the interest rate. When the government wishes to borrow, its demand for credit increases and the interest rate, or price of credit, increases. This increase in the interest rate makes private investment more expensive as well and less of it is used. Dependent variables include budgetary variables, meaning deficits and debts , and nominal or cyclically adjusted data. The debt ratio , either gross (without effect of

880-444: Is last year's debt (the debt accumulated up to and including last year), and r {\displaystyle r} is the interest rate attached to the debt, then the total deficit for year t is where the first term on the right side is interest payments on the outstanding debt. Finally, this year's debt can be calculated from last year's debt and this year's total deficit, using the government budget constraint : That is,

935-486: Is often called the fiscal deficit or just the 'deficit') is the primary deficit plus interest payments on the debt. Therefore, if t {\displaystyle t} refers to an arbitrary year, G t {\displaystyle G_{t}} is government spending and T t {\displaystyle T_{t}} is tax revenue for the respective year, then If D t − 1 {\displaystyle D_{t-1}}

990-460: Is the net spending of non-residents on this country's production. Thus total private saving equals private investment plus the public deficit plus net exports. In macroeconomics , the Modern Money Theory describes any transactions between the government sector and the non-government sector as a vertical transaction. The government sector includes the treasury and the central bank , whereas

1045-511: Is the value of all goods and services produced within a country during one year. GDP measures flows rather than stocks (example: the public deficit is a flow, measured per unit of time, while the government debt is a stock, an accumulation). GDP can be expressed equivalently in terms of production or the types of newly produced goods purchased, as per the National Accounting relationship between aggregate spending and income: where Y

1100-458: Is total taxation net of transfer payments . Combining the two perspectives gives Hence This implies the accounting identity for the three sectoral balances – private domestic, government budget and external: The sectoral balances equation says that total private saving ( S ) minus private investment ( I ) has to equal the public deficit (spending, G , minus net taxes, T ) plus net exports (exports ( X ) minus imports ( M )), where net exports

1155-525: The Organization of Petroleum Exporting Countries (OPEC), oil and gas receipts play a major role in public finances. Inflation reduces the real value of accumulated debt. If investors anticipate future inflation, however, they will demand higher interest rates on government debt, making public borrowing more expensive.total borrowing=fiscal deficit of that year A government deficit can be thought of as consisting of two elements, structural and cyclical . At

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1210-551: The Technology Strategy Board ). This was done via a strategic advisory group on which the chairs of each science and industry council sat. Following the June 2010 "emergency" budget , the coalition government announced its intention to replace the RDAs by smaller-scale partnerships between local authorities and businesses, known as local enterprise partnerships (LEPs). The RDAs were abolished on 31 March 2012. The RDA for

1265-431: The structural balance (also known as cyclically-adjusted balance ) and the cyclical component: the structural budget balance attempts to adjust for the impact of cyclical changes in real GDP , in order to indicate the longer-run budgetary situation. The government budget surplus or deficit is a flow variable , since it is an amount per unit of time (typically, per year). Thus it is distinct from government debt , which

1320-502: The RDA. They provided the context for other economic development and regeneration activity in the region and provided government departments with a framework that set out the direction that policies in the South West should support. The SWRDA's plans were aligned with three strategic objectives: The SWRDA invested in and supported over 5,800 economic development projects, large and small, across

1375-484: The RDAs were set out in the Regional Economic Strategy (RES) of each region. The RES was a document created and maintained by the RDA for the whole region, i.e. it was not simply a document to guide the RDA, it was intended to guide the work of other organisations also. Each RDA updated their RES on a regular basis (approximately every three years) by consulting widely with their partners, and stakeholders in

1430-548: The RDPE grant initiative through extensive partnership working, and the formation of a dedicated network of contracted county based project facilitators and business advisors. The SWRDA had an annual budget of around £160 million and spent almost £2 million opening offices as far away as Australia and China, and had offices or representatives in five international cities. SWRDA admitted in 2008 that it had spent £1,871,829 on international offices and staff since 2005 - these include Boston in

1485-567: The SWRDA on the effective use of science, technology and creativity. The SWRDA provided funding for the South West Observatory , a not-for-profit organisation which produces key data and facts about the region. Regen SW is now an energy consultancy, but began as the renewable energy agency for South West England, mainly funded by SWRDA. Regional Development Agency In the United Kingdom, regional development agencies (RDAs) were nine non-departmental public bodies established for

1540-401: The South West became Regen, a not-for-profit focused on accelerating the transition to clean energy The Regional Development Agencies were: Government deficit The government budget balance can be broken down into the primary balance and interest payments on accumulated government debt; the two together give the budget balance. Furthermore, the budget balance can be broken down into

1595-601: The UK government announced the abolition of the RDAs which took place on 31 March 2012, with a view to reducing the government deficit ; similar economic development would be undertaken by local councils and local enterprise partnerships (LEPs). There was no direct replacement for the RDAs as LEPs did not at first receive funding from central government, and local councils did not receive an equivalent injection of income from central funds, having been called upon to make savings and support similar initiatives. Regional development had been

1650-800: The US, Tokyo in Japan, Shenzhen in China, Melbourne in Australia and Mumbai in India. In the 2007–8 financial year, SWRDA also started an operation in Mumbai, which contributed to a total spend of £555,880.43. In March 2008 former Bristol Lord Mayor Peter Abraham criticised the SWRDA for these actions, saying that it should be more publicly accountable. The SWRDA was also criticised in December 2007 for spending more than £60,000 of taxpayers' money at

1705-740: The analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses. The Ricardian equivalence hypothesis, named after the English political economist and Member of Parliament David Ricardo , states that because households anticipate that current public deficit will be paid through future taxes, those households will accumulate savings now to offset those future taxes. If households acted in this way,

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1760-431: The bearer (rather than the original purchaser) so that the lenders could sell on some or all of the debt to someone else. This innovation reduced the risk for the lenders, and so the government could offer a lower interest rate. Examples of bearer bonds are British Consols and American Treasury bill bonds. According to most economists, during recessions, the government can stimulate the economy by intentionally running

1815-473: The causes of the sizable shift from private deficit to surplus: "This huge move into surplus reflects the end of the housing bubble, a sharp rise in household saving, and a slump in business investment due to lack of customers." The sectoral balances (also called sectoral financial balances) derive from the sectoral analysis framework for macroeconomic analysis of national economies developed by British economist Wynne Godley . GDP ( Gross Domestic Product )

1870-408: The cyclical deficit will be entirely repaid by a cyclical surplus at the peak of the cycle. The structural deficit is the deficit that remains across the business cycle, because the general level of government spending exceeds prevailing tax levels. The observed total budget deficit is equal to the sum of the structural deficit with the cyclical deficit or surplus. Some economists have criticized

1925-757: The debt after this year's government operations equals what it was a year earlier plus this year's total deficit, because the current deficit has to be financed by borrowing via the issuance of new bonds. Economic trends can influence the growth or shrinkage of fiscal deficits in several ways. Increased levels of economic activity generally lead to higher tax revenues, while government expenditures often increase during economic downturns because of higher outlays for social insurance programs such as unemployment benefits . Changes in tax rates, tax enforcement policies, levels of social benefits, and other government policy decisions can also have major effects on public debt. For some countries, such as Norway , Russia , and members of

1980-437: The distinction between cyclical and structural deficits, contending that the business cycle is too difficult to measure to make cyclical analysis worthwhile. The fiscal gap , a measure proposed by economists Alan Auerbach and Laurence Kotlikoff , measures the difference between government spending and revenues over the very long term, typically as a percentage of gross domestic product. The fiscal gap can be interpreted as

2035-459: The elderly population is growing much faster than the young population in many developed countries, many economists argue that these countries have important fiscal gaps, beyond what can be seen from their deficits alone. Before the invention of bonds , the deficit could only be financed with loans from private investors or other countries. A prominent example of this was the Rothschild dynasty in

2090-498: The following areas: The head office was in Exeter with other offices in Bristol, Plymouth and Truro. Each of England's RDAs was required to work with partners in the region to draw together a Regional Economic Strategy. This document set out for the whole region how the RDA's statutory objectives would be met and the region developed. These strategies were owned by the whole region, not just

2145-493: The inflation) or net, is used as a wider measure of government actions rather than measure of government deficit. Nevertheless, government generally set their yearly budget aims in flow terms (deficits) rather than in stock terms (debts). This is partly because stock markets variables are harder to target as circumstances outside direct government control (e.g. economic growth, exchange rate changes and asset price changes) affect stock variables more than flow variables. Concerning

2200-551: The late 18th and 19th century, though there were many earlier examples (e.g. the Peruzzi family ). These loans became popular when private financiers had amassed enough capital to provide them, and when governments were no longer able to simply print money , with consequent inflation , to finance their spending. Large long-term loans are risky for the lender, and therefore commanded high interest rates. To reduce their borrowing costs, governments began to issue bonds that were payable to

2255-563: The level of taxation relative to government spending (the government's budget deficit or surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government's activities per se. "Primary balance" is defined by the Organisation for Economic Co-operation and Development (OECD) as government net borrowing or net lending, excluding interest payments on consolidated government liabilities. The meaning of "deficit" differs from that of "debt", which

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2310-407: The lowest point in the business cycle , there is a high level of unemployment . This means that tax revenues are low and expenditure (e.g., on social security ) high. Conversely, at the peak of the cycle, unemployment is low, increasing tax revenue and decreasing social security spending. The additional borrowing required at the low point of the cycle is the cyclical deficit . By definition,

2365-560: The mayor appointed). The RDA chairs were all business people, while the boards were made up of representatives of business, local government, trade unions and voluntary organisations. The day-to-day running of the RDA was the responsibility of the Chief Executive who was appointed by the board, subject to approval by BIS ministers (or the London Mayor in the case of the LDA). The objectives of

2420-411: The net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This

2475-430: The non-government sector includes private individuals and firms (including the private banking system) and the external sector – that is, foreign buyers and sellers. In any given time period, the government's budget can be either in deficit or in surplus. A deficit occurs when the government spends more than it taxes; and a surplus occurs when a government taxes more than it spends. Sectoral balances analysis shows that as

2530-500: The percentage increase in revenues or reduction of expenditures necessary to balance spending and revenues in the long run. For example, a fiscal gap of 5% could be eliminated by an immediate and permanent 5% increase in taxes or cut in spending or some combination of both. It includes not only the structural deficit at a given point in time, but also the difference between promised future government commitments, such as health and retirement spending, and planned future tax revenues. Since

2585-438: The private sector, whereas budget surpluses remove financial assets from the private sector. This is represented by the identity: where NX is net exports. This implies that private net saving is only possible if the government runs budget deficits; alternately, the private sector is forced to dissave when the government runs a budget surplus. According to the sectoral balances framework, budget surpluses offset net saving; in

2640-790: The purpose of development, primarily economic, of England 's Government Office regions between 1998 and 2010. There was one RDA for each of the NUTS level 1 regions of England . Similar activities were carried out in Wales by the Welsh Government Department of Economy and Transport, in Northern Ireland by the Department of Enterprise, Trade and Investment and in Scotland by Scottish Enterprise and Highlands and Islands Enterprise . In June 2010

2695-649: The region during its lifetime. Significant examples include: Figures published in 2010 showed that the SWRDA’s work had: In 2010/11 the SWRDA invested £239 million (its largest spend in a single year) in initiatives across South West England from its own funds and from the European Regional Development Fund (ERDF) and the Rural Development Programme for England (RDPE), in all benefiting over 500 live projects. SWRDA managed delivery of

2750-412: The region, including local government, voluntary organisations, private organisations, and other interested groups. The RES was submitted to the Department for Business, Innovation and Skills for formal approval. The RDAs sought to achieve their objectives in a variety of ways. The most obvious of these was by funding projects aimed at addressing them, either directly from the RDA, or indirectly through

2805-489: The third quarter of 2007 and the second quarter of 2009, which was when the financial deficit of US government (federal and state) reached its peak...No fiscal policy changes explain the collapse into massive fiscal deficit between 2007 and 2009, because there was none of any importance. The collapse is explained by the massive shift of the private sector from financial deficit into surplus or, in other words, from boom to bust." Economist Paul Krugman explained in December 2011

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2860-429: The three northern RDAs (Northwest Regional Development Agency, Yorkshire Forward and One NorthEast) collaborated on The Northern Way . Each RDA had a science and industry council (SIC) made up of business, university and public sector experts. Each SIC advised its RDA on science and innovation investments. Each region had a slightly different focus, but all SICs contributed to the national Technology Strategy (owned by

2915-533: Was approximately 10% GDP (8.6% GDP of which was federal), offsetting a capital surplus of 4% GDP and a private sector surplus of 6% GDP. Financial journalist Martin Wolf argued that sudden shifts in the private sector from deficit to surplus forced the government balance into deficit, and cited as example the U.S.: "The financial balance of the private sector shifted towards surplus by the almost unbelievable cumulative total of 11.2 per cent of gross domestic product between

2970-645: Was estimated to rise to £4.50 when long-term investments in infrastructure matured. Eight of the nine RDAs reported to the Department for Business, Innovation and Skills (BIS), the exception being the London Development Agency (LDA), which reported directly to the Mayor of London and the London Assembly . Each RDA was led by a chair and a board of 15 people, appointed by BIS ministers (except in London, where

3025-412: Was pooled, and then allocated to each of the RDAs based on several factors, such as the percentage of people living in deprived areas within the RDA catchment area and the unemployment rate. The total funding, known as the 'Single Pot', was: In 2009 a study by accountants PriceWaterhouseCoopers showed that RDAs were generating £1 for the local economy for every £1 of public spending, though this figure

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