Budget 2013: Chancellor may have to borrow more than expected

 
Pound coins stacked in front of a £20 note The chancellor may have to borrow more money than had been expected

Boxed in. That is how George Osborne has described Britain's budget situation since 2010 - and his own, as chancellor.

The government's deficit was in triple figures when he came into the Treasury, and it's still in triple figures today.

Whitehall departments have stuck to the chancellor's budget plans since then. In fact, they have spent rather less than he first asked them to.

That is why he has again felt able to take a few billion more pounds out of their budgets for the next two years, to increase infrastructure spending and perhaps deliver other minor goodies later today.

No, it's not Whitehall, but the UK economy that's wildly departed from the chancellor's original script.

Britain's national output has risen by just over 1% since the election, instead of the 7% George Osborne was hoping for in his first Budget.

Today he is likely to announce that the official growth forecast for 2013 has fallen again, from the 1.2% pencilled into the Autumn Statement.

Higher borrowing

As a result of all this, nearly every expert is predicting that the chancellor will have to borrow more in this tax year, on a like-for-like basis, than in 2011-12, when the budget deficit was £121bn.

Mr Osborne avoided that widely predicted embarrassment in December. A few in Westminster suspect he will somehow avoid it again today.

But either way, we can be confident that today's Budget Book will show him borrowing at least £65bn more, in the last year of the Parliament, than he was planning in 2010 (at least, borrowing by then is not supposed to be in triple figures).

For Labour and other critics, the slow growth and higher-than-expected borrowing we have seen since 2010 are reason to change course.

The most optimistic think higher spending will pay for itself. Others, such as Paul Krugman, are not so sure.

But they think higher growth is worth the long-term cost of higher borrowing - that if the government is going to be forced to borrow more anyway, it might as well choose upfront what it is going to spend that money on.

Mr Osborne thinks different - and so, probably, do the majority of city economists.

They think that this bad news has left us even more boxed in by the legacy of the financial crisis than we were in 2010.

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

So it's goodbye from me

After 11 years at the BBC, I'm leaving for a new role in the City.

Read full article

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    0

    Comment number 168.

    As the entire economy is dependent on perpetual debt, it becomes blindingly obvious why they are making it easier for people to obtain mortgages. Without economic overhaul the national debt can only continue to increase and any talk of lowering it without totally revamping the way the country produces its money supply is impossible. Until then, our economy will be dependent on this perpetual debt.

  • rate this
    0

    Comment number 167.

    Of course the chancellor has to borrow, our entire economy depends on perpetual debt in order to survive. 97% of our money supply is created as debt by commercial banks through loans and mortgages. In addition, as we operate a debt-based system, the economy actually shrinks as debt is repaid and is wholly dependent on perpetual borrowing to sustain it: www.positivemoney.org

  • rate this
    0

    Comment number 166.

    This housing boost is very dangerous! It may create another housing bubble that could burst with just a modest rise in interest rate. Am wondering if it is "intentional" so banks may get rid of bad assets at relatively inflated prices thus it is the public (yet again) that carries the burden of this!

  • rate this
    +1

    Comment number 165.

    Definition of financial insanity = do the same thing over and over and expect diffirent results.
    Dear George: The government's deficit was in triple figures when you came into the Treasury, & it's still in triple figures today."
    Something is not working, & I think it's austerity.

  • rate this
    0

    Comment number 164.

    The BBC is great, another completely impartial article making some very good points. I urge people to read this unbiased article.

    I also enjoy the interesting and well thought out comments on this board. The impartial fair way in which comments are screened is extremely reassuring. Up2snuff & IR35_SURVIVOR & others make very good points I agree with.

    I did not like the budget though

 

Comments 5 of 168

 

Features

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.