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By Peter Hoskin
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Storm clouds

It must be particularly difficult
for George Osborne to get out of bed this week – and not just because of the
cold. Most mornings he’ll have yet another set of dreary economic figures to
crunch on alongside his breakfast cereal. On Friday, we’re expecting
confirmation that the economy shrank in the last three months of 2012. Today, it’s
the latest public finances data from the Office for National Statistics,
which suggest that borrowing and debt are on the rise.

This rise in the debt, to £1111.6
billion at the end of December, oughtn’t be surprising at all. We always knew
that debt would go up in cash and real terms over this Parliament. And, as of
the Autumn Statement, we knew it would keep on going up as a percentage of GDP,
too.

But what about the borrowing?
Today’s release reveals that public sector net borrowing* for the first nine
months of this financial year (i.e. April to December, 2012) stood at £106.5
billion, a £7.2 billion increase on the £99.3 billion borrowed in the first
nine months of the previous financial year. Basically, a sluggish economy meant
that government spending grew faster than tax receipts.


So, how
does this square with the Government’s aim of getting borrowing down? The basic
point is that the ONS numbers don’t account for various effects—from the
expected 4G windfall, to transfers from the ‘Bank of England
Asset Purchase Facility Fund’—that the Office
for Budget Responsibility includes in its forecasts for the financial year as a
whole. The OBR still have borrowing falling from £121 billion in
2011-12 to £108 billion in 2012-13. And, judging by the analysis of today’s
figures
that that they’ve just released, they still seem fairly sanguine about the
Government achieving that, although it is probably much closer than the
Chancellor would wish. Here are two key paragraphs from that analysis:

“4. Two one-off items are expected to reduce
borrowing in the remainder of the year: £11.5 billion from the transfer of the
proceeds of the Asset Purchase Facility (APF) to the Exchequer in the final
quarter; and the proceeds of the 4G spectrum auction before the end of the
fiscal year. We assumed in the December [Economic and Fiscal Outlook] that the
spectrum auction would raise £3.5 billion, in line with published estimates by
outside industry experts.

5. Excluding these items, our forecast
implies that PSNB in the remaining three months of the year would need to be
£6.3 billion lower than last year to match the December EFO forecast [for
borrowing of £108 billion in 2012-13]. This implies modestly higher receipts
growth and weaker spending growth than we have seen in the year-to-date. In the
EFO we expected this to come about through stronger growth in receipts from
self assessment income tax and VAT than have been seen so far this year and
continued underspends in central government departments in the later months of
the financial year.”

Whether
this changes in future… well, it’s possible. Every set of fiscal forecasts
seems to look more precarious than the last, and it's hardly encouraging that the Chancellor is left having to rely on various windfalls and transfers to meet his mark. But, in the meantime, pay little
heed to Labour and their attacks on the Government. As any fule kno, Labour
would have borrowed even more

* Excluding the distortive effects of the Royal
Mail pensions transfer.

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