BBC BLOGS - Stephanomics
« Previous | Main | Next »

Borrowing headlines

Post categories:

Stephanie Flanders | 13:09 UK time, Wednesday, 24 March 2010

The chancellor has announced a net borrowing figure for 2010-1 that is £13bn lower than forecast in the PBR. The figure for 2009-10 is nearly £11bn lower, but the revisions for future years are a bit smaller: he's taken £7bn off the borrowing figure for 2013-14.

Net debt hasn't fallen much: the forecast is now that it will rise to 75% of GDP in 2014-15, instead of 78%

I said focus on the structural deficit numbers. We now know that the structural deficit in 2014-15 is forecast to be 2.5% of GDP by 2014-5, down from 3.1% previously. The City will note that two-thirds of that that improvement in the underlying situation has been put into cutting total borrowing in 2014-15: that's gone down from 4.4% of GDP to 4%.

Update 13:19: As I expected, he's revised down slightly the growth forecast for 2010. The borrowing forecasts now assume growth of 3% next year, not 3.25%. But the chancellor has stuck to his view that the recovery will be stronger than the City expects. The Bank of England is on his side on this one. And 3% still looks like a weak recovery, given the recession we've just had.

As I also expected, he has announced a new national investment fund - OK, he calls it a corporation - to support private investment. This will be hard for the Conservatives to oppose though the figures involved do not seem to be large.

Update 13:26: We're waiting to see the numbers in the Budget book, but the chancellor is clearly spending a lot more time and money on the measures for companies and boosting investment than he is on voter-friendly measures like the cut in stamp duty.

Update 13:52: The stamp duty cut is even cheaper than I thought: the Budget book shows it costing £230m in 2010-11 and £290m in 2010-11.

Update 14:20: Where he is spending money, the chancellor is spending it on things that it will be very difficult for the Conservatives not to match.

A case in point: the single most expensive measure in this Budget is the increase in winter fuel allowance for older pensioners. At his press conference yesterday, David Cameron yesterday was cornered into promising to keep winter fuel allowance "as he inherits it". The cost of the allowance this year has just gone up by £600m.


  • Comment number 1.

    'And 3% still looks like a weak recovery, given the recession we've just had.'

    Looks very optimistic given the economy we've now got, bloated public sector, crippled private sector.

  • Comment number 2.

    'As I also expected, he has announced a new national investment fund - OK, he calls it a corporation - to support private investment'

    And it will be as much use as a chocolate tea pot. That's all we need, a labour government trying to pick winners.

  • Comment number 3.

    The banks are not lending to business investment although they were provided funds from the taxpayers to do just that. These selfish institutions are only interested in the highest profits and do not concern themselves with the traditional role of banks. Countries now must fund business development because banks will not. The structural change in banking policy, make the staff rich, stalls recovery efforts. The question remains: why were they bailed out? Nations and taxpayers assumed both debt and service cuts because of actions created by the banks and now they refuse to change and continue with their process of greed and corruption. The governments should provide them each with a pay-back schedule that is compressed and if they cannot meet their payments have them sell their a foreclosure.

  • Comment number 4.

    'time and money on the measures for companies and boosting investment'

    Could you explain to me how these measures differ from all the other measures New Labour have implemented over the last 13 years that have failed abysmally ?

    If Labour have the faintest idea about promoting investment can you explain to me why there's been a collapse in private sector investment over the last 13 years ?

    I'm sure we'd all welcome some detailed analysis on Labour's track record in this area Stephanie (note I'm taking about actual outcomes rather than just spin).

  • Comment number 5.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 6.

    If ever there was a "Titanic stopping to take on ice" ? Everything's under control, no worries, we are still the envy of the world, we simply have to step up our manufacturing a bit, in the mean time we've got "Loads of money " to carry on doing the same.

    Obviously the new buzz message is look how we are investing in technology. Power generation, electric cars, new rail links, everything's coming up roses now.

    Don't want to urinate on your chips Darling, but it does n't work that way. Somebody has to make long term investment in the hope they will get a return eventually. Saying commercial banks will lend money to help industry grow in speculative sectors, is not the way they work, ( That only works in finance, but then Darling , you are an accountant I suppose)

    We are talking about a 20 year project. if the trained graduates are available now, the industries to absorb them are not, so what do the graduates do? Go elsewhere and become "no longer available for work". Where then is the money to train the next bunch ?

    Craftsmen, the ones that made this country great, took a minimum 5 year apprenticeship, and were held slightly better than useless until they had several years of resposible employment. Now where are the trainees, and more to the point where are the trainers ?

    Recovery is essential, and possible, I for one will be more encouraged if I could see someone, of any party, who, in the run up to this election will give me some hope that they can see the mess which has been generated over the past 25 years by successive governments, and has a viable plan, properly costed and financed, to regenerate our wealth creating activities, instead of speaking interminably about where they will, or not spend money they don't have.

  • Comment number 7.

    I think it would be more responsible to think of our children rather than remember our grandfather. Lets not forget that Pimco has been underweight gilts as the UK's debt levels will increase further and will likely lead to higher inflation "and a depreciating currency relative to other countries, ultimately lowering the realized return on its bonds. If that view becomes consensus, then at some point the U.K. may fail to attain escape velocity from its debt trap."
    It would have been a not so bad budget if it had focussed on attaining escape velocity from the debt trap rather than a government "going for broke" to win the imminent election and risking a further plunge into debt.
    Can individual countries escape a debt crisis by creating even more debt and riding another rocking horse winner? Our children will know the answer and the able ones will draw their own conclusions on their parents qualities.

  • Comment number 8.

    'Where he is spending money, the chancellor is spending it on things that it will be very difficult for the Conservatives not to match'

    Of course, that's the whole point of this budget, try and embarrass the Tories. Labour long since stopped caring about this country, that's if they ever cared in the first place.

  • Comment number 9.

    Age-discriminatory winter fuel allowance is a joke and shouldbe means tested at least, if not scrapped.

    Domestic fuel use is far more polluting in terms of CO2 than transport, yet fuel tax is immense, and VAT on home fuel is a paltry 5%

    Why? Could it be taht motorists are easy targets, and these "environmental" taxes are nothing of the sort?

  • Comment number 10.


    Lets reinflate the property bubble and tax some wurzels. Job done, let the bond market put that in their pipe and smoke it.

  • Comment number 11.

    Thank you for the updates and comments on todays Budget Stephanie. It must be keeping you very busy!Disappointingly the budget lacks the innovation and reform suggested by the notayesmanseconomics blog and has appeared to use all the ruses he suggested might be used as a way of reducing projected debt.
    However one statement by you I would like to query.

    "And 3% still looks like a weak recovery, given the recession we've just had. "

    Does this mean that you are forecasting higher growth going forwards?

  • Comment number 12.

    Mr Darling is rather like a cowboy builder who simply papers over the cracks and thinks that everything will be fine.Unfortunately, the opposition parties are no better. They are all content with merely tackling symptoms.

    For instance, removing stamp duty for properties under £250k for first time buyers fails to acknowledge that the problem is that prices are out of sync with incomes. Banks broke all the rules and lent people ever increasing multiples of incomes, which inflated property prices out of all proportion to peoples earnings. They then exacerbated things further with con tricks like Interest Only Mortgages, which were nothing more than expensive rental agreements. This stupidity also facilitated the obscene Buy-To-Let industry, which created the equivalent of private sector council housing and thereby forced many out of the market.

    In order to create a stable property market properties will have to fall to the equivalent of 2.5-3 times salaries as they used to be with a minimum 10% deposit. On the above basis property prices will have to fall between 50-70%. BTL should also be banned. Property should not be an investment, but a place to live.

  • Comment number 13.


    banks not lending- I am really not too sure about this as it is an easy rock to throw. From what I am hearing, it is just as much to do with businesses not wanting to borrow. After all if your customer base is de-leveraging, which I guess most of us are, then why would you borrow money for new plant and machinery just to chase less business? The only expanding sector in the economy is HMG and what chance does any SME have of getting a chunk of this when the first thing that you have to do is demonstrate equality and diversity. Not easy to do when you only have 5 employees and are located in North Yorkshire.

  • Comment number 14.

    Is it not extraordinary that the Budget does not provide the usual detailed spending limits for Government departments? Why?

    By ducking their responsibilities, Labour are trying to deceive the electorate re what they are really planning. So why should anybody trust them?

  • Comment number 15.

    No body has yet mentioned it so I want to be the first.

    All this guff about investing in technology etc .. remember the slogan

    "white heat of technology"

    Harold Wilson's govt slogan which eventually led to total humilation of Dennis Healey going to IMF. Now, like then, we have a chancellor with the daftest eyebrows going. Any bets on history repeating itself?

  • Comment number 16.

    glad to see that most comments so far are not from Mr Cameron fans .... the budget is as any government will do a pre election budget, please lets have a hung parliament and get all the people who know what we need around the table and have some unity of ideas.

  • Comment number 17.

    I am worried by this budget. It feels a little like moving the deckchairs on the titanic before it sank. I hope he is right about the level of growth because if he is not we are in a mess.

    I do feel he missed an opportunity to remove the tax breaks on Buy to Let which I feel would be a good source of revenue as this assistance is unfair as it promotes an increase in house prices and removes the opportunity of affordable home ownership.

  • Comment number 18.

    12. At 3:32pm on 24 Mar 2010, DHA wrote:
    'Property should not be an investment, but a place to live'

    My wife and I own a house and have three children, two of whom are now men in fact.

    In any event if house prices fell by 50% we would lose a lot of money.

    But I would be extremely happy, because my children could afford a place to live.

  • Comment number 19.

    A political budget, designed to pull in more votes in the election.

    As Stephanie says elsewhere, the City thinks that New Labour will win, so Darling has nothing to lose.

    We do though, the economy will go down the tubes even faster than before.

  • Comment number 20.

    All-in-all, a sound budget, if a little pessimistic by my standards.
    I expect growth for 2010 to exceed 2.5% and to be near 4% in 2011 and I expect public borrowing to reduce even faster than has been predicted.
    There are a few little signs I am noticing ....a dearth of good car deals, lots of bijou properties are being snapped up, encouraging noises from banks, unemployed friends getting jobs, a meal out on Saturday in an absolutely jam-packed multi-million quid new restaurant, and word from locals that they are unfreezing their shelved developments and getting back into gear.
    There's also going to be another interesting boost exactly where it is not expected:
    A joint party peri-election relaxation/amnesty for asylum seekers is going to allow a couple of hundred thousand people currently on benefits to normalise their status and therefter to seek gainful employment.This will also result in a tranfer of monies from overseas into the UK which they have not been able to access at the moment, as they seek to establish themselves more commmodiously here, leaving designated public housing, setting up businesses, making plans.
    As they rehouse they will be buying furniture and doing home improvements and applying for mortgages.......
    It's going to be a lovely summer.
    Let's hope the Tories don't get in and wreck it the way they usually do with their high interest rates, high inflation, high unemployment and customary incitement of social unrest.
    Fingers crossed.

  • Comment number 21.

    The markets move in wondrous ways their beauty to behold. And their beauty is their financial backing. Europe and the Euro must still be in their sights. Germany is creaking and the stability of the Franco German alliance must be at best, questionable. If there is not a fully supported / funded EMU then Greece must once again be at risk with open season being declared. Now Portugal has had it's credit rating downgraded from AA to -AA with that minus sign adding millions to finance its debt. There are also question being asked about the other members of the PIIGS club. All in all is this a train wreck about to happen.

    Why bring this up - well two reasons;

    1) Europe is one of our largest markets and as such we are reliant on it being buoyant to assist with our recovery. So if Europe is not fully open for business it will be greatly detrimental to our recovery.

    2) Our current state has numerous similarities to those of the PIIGS. As such our rating must and will be called into question and as we paid more than £31 billion last year to service our debt and move in our rating could be very costly.

    Still more questions than answers - the budget may do more harm than good once the detail is out.

  • Comment number 22.

    Can someone tell me how the old Stamp Duty will not go directly onto the purchase price? It just increases the buyers purchasing power ... which increases the price paid. So zero benefit to the buyer.

    The Exchequer loses out, the Stamp Duty drops into the pocket of the vendor. The property market stays exactly the same.


  • Comment number 23.

    Labour (on their highly dubious figures) claim to be on course to reduce the deficit a bit quicker than they previously thought. How come that is a good thing, but, when the Conservatives suggest it, they are accused of undermining the recovery?

  • Comment number 24.

    So, you don't want to borrow too much to buy your first property? Don't worry, Mr. Darling will borrow it for you (and charge you back through future taxes, whether you buy one or not).

    "The stamp duty cut is even cheaper than I thought: the Budget book shows it costing £230m in 2010-11 and £290m in 2010-11."

    Some fairly hefty assumptions in there about the future property prices, I would have thought.

  • Comment number 25.

    The Budget figures for Britain make me nervous.
    Britain is essentially rejecting EU criticism as “wrong”, and it seems to be rejecting them in a rather arrogant, pompous knee-jerk fashion. Without a doubt, Britain’s reduction of its massive debt will not occur quickly enough. Who cares where the advice comes from as long as it's the best possible advice to assist Britain to reduce her long-term debts?
    Chancellor of the Exchequer Alistair Darling said British policy should be set in London, not Brussels. Well, I disagree with that. In these difficult economic times, Britain should openly listen to advice from anywhere and everywhere, except the United States of America.
    The EU's executive, the European Commission, is expected to publish a report Wednesday criticizing Britain's plan to halve its budget deficit in four years as insufficiently ambitious; and that's exactly what it is: unsufficiently ambitious. The more debt you have the more it costs to service that debt and servicing debt is like throwing money into the air – You get nothing form it.
    Chancellor of the Exchequer Alistair Darling said the commission's draft recommendations would mean taking 25 billion pounds (38 billion dollars) out of the economy. With parliamentary elections due to take place in the spring, Darling's comments were seen as an attempt to distance his party from Brussels in the eyes of eurosceptic British voters, but this may not be a good time to become more Eurosceptic. In fact, it may the worst of times.
    Britain's budget deficit for 2009 stood at 12.6% of GDP, one of the worst figures in the EU and far beyond the bloc's recommended limit of 3%. In fact, this places the UK in roughly the same financial position as Greece, and yet Greece has introduced stringent spending cuts as well as welcoming EU financial wizzards to audit the books, identify potential problems, and assist in fixing them.
    Under UK's rejection conditions, the commission is required by law to present a report commenting on the British government's plans and recommending its own measures. Leaked drafts of the commission report, due for finalization on Wednesday, criticize Darling for not trying hard enough to bring the deficit back into line with EU rules. But the chancellor argued that any attempt to impose still deeper budget cuts on his country would risk crippling its fragile rebound. What fragile rebound? The bank aren’t lending; jobs aren’t being created? Banks may be undercapitalized? If this is a rebound, it has all the bounce of a heavy stone.
    What has crippled Britain’s financial rebound has been its lock-step with the United States; personally, I'd rather be associated with the EU.
    Darling wants to get the borrowing down, but feels it is equally important that we do it in a way that does not damage the economic fabric of the country" What economic fabric of the country? It’s already sackclothe, isn't it?
    Since Britain does not have the euro as its currency, the commission therefore has no right to enforce fiscal changes....too bad...

  • Comment number 26.

    So the government is going to continue to spend more than it collects in taxes and by 2014-15 this overspend will still be 4% of GDP, per year.

    Hang on though, the government "only" takes 39% of GDP in tax (Wikipedia) so this surely is an overspend of over 10% !

    Where is the plan for the government to live within its means? Or even to actually pay off the debt that will cripple the country in interest payments alone for generations.

  • Comment number 27.

    So little for savers, and so long to wait for it. What's the point?
    A non budget and Darling seems to hate cider drinkers.
    I suppose we are all waiting for the general election

  • Comment number 28.

    The Chancellor wants to make a great deal of fuss about reforming banking regulation. Has he overlooked the fact that it was his successor who was responsible for the current system, the one that he is so keen to say needs to be changed?

    He talks a great deal about global recession, but does not want to cite Australia and Canada which largely avoided recession because they had used prudent financial policies, not the profligate policies of the previos chancellor

  • Comment number 29.

    Since May 1997, our national wealth has risen in real terms by 40%. The fastest growth in our wealth - ever.
    Now there's a forecast that we shall enjoy the fastest rate of growth in Europe over the next two years. And our accumulated national debts are already one of the lowest in the G20.
    Britain is working hard on all fronts, tax revenues are rising once again and debts are set to fall steadily.
    Apart from in Scotland - which is cursed with a minority Scottish Nationalist administration - the future looks much rosier.

  • Comment number 30.

    Therealsceptic writes to complain that neither Canada nor Australia have suffered such harsh effects of the worldwide Banking calamity as ourselves. Because 'therealsceptic' argues, neither country had more prudent policies than the UK.
    That still leaves unexplained, the recession hit German economy where accumulated growth and unemployment are much higher than in the UK. Is 'therealsceptic' suggesting Germany to be much more imprudent than the UK? I hope not.
    Reality is that the wealth of both Canada and Australia is very much more reliant upon trades in commodities (oil, iron ore and othe minerals) than European countries, and that commodity prices are at record levels because of China's growth.

  • Comment number 31.

    Well well well...
    Neo-liberal Labour versus Plutocratic Tories!
    Who can cut the most and who can do it fastest so that 'we', AKA the proles, can 'pay our dues' that have been kindly racked up for us all by our ever corrupted political elites.
    Am I to understand that significant chunks of this borrowed money is likely being 'borrowed' from exactly the kind of mega-rich entities who likely employ 'reputable accountants' to dodge taxes in the first place? For example, those such as these 'non-domiciled' business/ banking oligarchs who, perhaps, play the bond markets via vehicles such as Pimco... WHAT A SCAM!!! Due to our fabulous riches and power you can't tax us BUT... Due to our global community spirit we'll 'lend' you some money... At interest! By the way it doesn't really matter if millions are impoverished or made redundant to get this money back to us on time. Tough choices will need to be made...
    Knowing the UK I think Dave and Gideon will, by hook or by crook, be installed and on hand to feed 'the Market' and provide Gilt/ Bond holders with their 'pound of flesh'. Dave's literally foaming at the mouth to carry out the bloody bidding of his 'friends' in 'The City'...
    Alas the tryranny of the ages continues to prey as fully as ever upon mere mortals and disenfranchised citizens in service to power hungry meglamaniacs.

  • Comment number 32.

    #20 - steady on Mr Ho - Mr (my forecast of a winter of discontent, massive unemployment, collapse in the housing market, hasn't quite worked out)WOTW, will blow a needed to break it to him much more gently......
    Regards to you both.
    TM StH

  • Comment number 33.

    32 remoteislander

    Thanks remote, it was quite a lonely job being the only person disbelieving late noughties economic orthodoxy!

  • Comment number 34.

    Fascinates me how many fall for the line that Dave will look after his friends in the city ! Get the economy right instead of feasting on debt and everyone benefits,hasn't that permeated the brains of the electorate yet ? I much prefer the idea that people actually going to work may benefits instead of Jeremy Kyle candidates sitting at home collecting free money being lovingly showered with more in some form of sentimental,political beauty contest.

  • Comment number 35.

    Leftie does not present any counter argument to my contention on the regulatory system, so presumably accepts my attribution of the authorship of the failed system.

    So far as prudence is concerned, the Germans did not massively overspend in the vain hope that that the birds would never come home to roost. Are they in the mess that we are in? I think not!If he looks at the statistics, I think he will find that there was a marked fall in commodity prices,but the Canadian and Ausralians did not finish up in a mountain of debt. He should also be aware that the Canadian Government long ago looked at what it could, and could not afford, and put its house in order.

  • Comment number 36.

    Four out five of young people and half of those aged between 25 and 34 are not saving for their retirement, according to the Department for Work and Pensions.

    Despite efforts by the government to promote pension planning amid concerns about a lack of provision, especially among the low-paid, young people are the most likely to delay setting aside money for when they stop work. The DWP survey showed that 80% of those aged 18 to 24 had no pension plan and [Unsuitable/Broken URL removed by Moderator]>overwhelming debt.


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.