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 Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • 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
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    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

  • rate this
    +1

    Comment number 163.

    Summary
    No change in economic plan

    No activity to actually support the economy

    Refusal to listen to economic advice to use fiscal policy in conjunction with monetary policy

    Refusal to address the housing bubble (the next recession maker)

    Refusal to address the lack of private sector jobs

    All in all, a budget with the blinkers on, and some clever Enron accounting to hide 2013 spending in 2014

  • Comment number 162.

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

  • Comment number 161.

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

  • Comment number 160.

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

  • rate this
    0

    Comment number 159.

    56VM
    29U2S
    apart from the people whose tax rate gets increased to 50%!! Is it their fault the economy is in recession then?
    ~
    Yes

    When you think of some of the 'drivers' of 2007-09, they would have been caused by people on high earns, not those on low or none.

    As their 'take' from our economy is still huge&GROWING despite recession, low taxes on that group compounds recession for all.

  • rate this
    +1

    Comment number 158.

    56.VictorMeldrew
    29. Up to snuff

    "....no one will have lost out" ....apart from the people whose tax rate gets increased to 50%!! Is it their fault the economy is in recession then?
    ~ ~ ~
    No. They would not have gained.

    If GO had re-instated the 50% rate for 6/4/13, the top rate taxpayers would have lost nothing more to income tax.

  • rate this
    0

    Comment number 157.

    153wSTILLoTwall
    151U2s
    "spend GO announced today, whether wise or not, has been achieved w/out seeking further loans"

    Haven't you worked it out yet? The cost comes in form of higher borrow down the road.
    ~
    Not necessarily. See my last post on NR Blog. GO's hostage to fortune. He may get away with little or no extra borrow; OTOH it could all fall apart on this street let alone down the road

  • rate this
    +1

    Comment number 156.

    Europe have the Cyprus problem looming large. We have a budget from the Chancellor of the Exchequer.
    The pound LOST almost half a per cent!!!!!!

  • rate this
    +1

    Comment number 155.

    #153 yr r having a giraffe , labour honest with borrowing , thats fairy story time.

    Even at the "height" of the boom they borrowed more than was being raised in taxes.

  • rate this
    0

    Comment number 154.

    151.
    Is that ignoring the £120Bn spending deficit?

  • Comment number 153.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 152.

    #148 r u the spokes person for the comedy show that is know as the 2 Ed's.

    reminds me of a Dave edmunds song crawling from the wreckage ;

    of yet another labour governemnt. They started in 1997 wit hthe uk AT LAST GOING IN THE RIGHT DIRECTION then proceed to wreck the UK again

  • rate this
    0

    Comment number 151.

    @146ToryBoy
    Seems to have escaped your notice that the spending GO announced today, whether wise or not, has been achieved without seeking further loans. Unlike N.Lab who would have borrowed to fund the spend.

    One of the few brightish spots of Budget, except I would have had GO keep the money in the bank or use it for better, wider achieving measures.

  • rate this
    +2

    Comment number 150.

    139 TB

    The extra borrowing we are having to undergo is as a result of the lack of economic growth
    Cutting away at government departmental spending though is a useful exercise & if we can maintain it at this lower level then when growth comes we will be in a good place
    Economic growth will come as a function of global growth and our productivity, innovation and entrepreneursip not govt action

  • rate this
    0

    Comment number 149.

    #146 that is not true, were was Gordon Brown today to face the music of his creations.

    He is on an MP salary and expenses etc BUT is never seem in the houses of Parliament ?

    wonder why?

 

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