More red ink for Chancellor George Osborne


The Chancellor was able to confound the opposition last month, unveiling new borrowing forecasts which showed the deficit falling this year - against all expectations.

Today's borrowing statistics for December don't bring a lot of new information, but they are slightly worse than expected.

Despite the array of special factors helping to pull the deficit down, it wouldn't take much more bad news for Ed Balls to have the last laugh when George Osborne is forced to reveal new forecasts at the time of the Budget in March.

One piece of good news for the Chancellor: borrowing in the months before December has been revised down. But total borrowing since April is still running about 7% above the same months of 2011.

Even if the government managed to borrow the same amount in the last three months of the tax year as it did the previous year, borrowing for 2012-13 would be just under £129bn, significantly above the £121bn deficit for 2011-12.

As we know, that's not the whole story, because there are lots of one-off factors acting to pull down the final figure for 2012-13, including the Royal Mail pension fund transfer and the debt interest now being transferred to the Treasury by the Bank of England.

No progress
Credit Suisse

Excluding all of those extras, the Office for Budget Responsibility forecast in December that borrowing would fall by just over £1bn in 2012-13, to £120.3bn - and only with the help of money being raised from mobile phone operators after the auctioning the 4G spectrum.

It might. But the best that can be said, on the basis of these figures, is that it will be a very close run thing. Most independent economists in the city seem to think that borrowing will overshoot - and that Ed Balls will be able to say in March that the deficit has risen in 2012-13, after all.

So much for the political theatrics. The more important point for all of us, highlighted in a useful graph by Credit Suisse (above), is that the government has not really made any progress in cutting the deficit since the start of 2012.

The deficit reduction effort has more or less stalled, along with the broader economy. You can expect the ratings agencies to be paying nearly as much attention to this inconvenient truth as Ed Balls is.

Stephanie Flanders, Economics editor Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this

    Comment number 58.

    Anyone who is skint knows that just cutting back will rarely enable you to restore your finances - you need to increase your income.

    As governments have no way of making any income they have to provide a climate in which citizens' and companies' prosperity improves so that tax contributions will increase.

  • rate this

    Comment number 19.

    I have never felt that the UK could possibly make progress. As soon as the bail-outs began, the ultimate result was foredoomed. Bail-outs solve nothing; they simply save the wrong coporations from bankruptcy while doing nothing to help the people.
    The UK should have learned this lesson from Japan and the US.

  • rate this

    Comment number 22.

    The contributions from the 4G auction (not happened yet), the RM pension fund transfer (which is, of course, a massive liability in the long term) and QE interest (that's interest on the Government's own debt) are so brazenly dishonest that Osborne should resign merely for considering the public to be as stupid as he is.

  • rate this

    Comment number 80.

    I'm sure the poor borrowing figures won't be the Chancellor's or the Government's fault however, it'll be down to the snow, the Christmas break, crisis in the EZ, President Obama's inauguration - anything which they can point to that it outside of their control. The Government's lack of vision , lack of responsibility, lack of accountability for actions taken is breathtaking

  • rate this

    Comment number 73.

    @17.Charles Jurcich
    Indeed Keynes would be spinning violently. Taking money from the UK economy and spending it in Germany, China, America, Russia, France, Italy, Spain, Africa, India.... that is going to lead to recession, massive recession. The more money you spend abroad the worse the recession. Read Keynes, to grow your economy you need to spend money in your own economy.


Comments 5 of 471



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