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George Osborne might meet his debt target after all

23 November 2012

When George Osborne gives his Autumn Statement on 5 December, the OBR will publish its new forecasts for growth, deficit and debt. For the last few weeks, the consensus has been that the OBR would declare that Osborne will miss the debt target he set himself in 2010: to have the debt-to-GDP ratio falling in 2015-16. The logic behind this, as I set out in September, is pretty straightforward: the OBR will have to lower its growth forecasts, which will in turn mean lower tax revenues, higher deficits and more debt. But it now looks like Osborne might narrowly avoid failure, though not because the outlook for the economy or the government finances is any brighter.

Instead, according to Citi’s Michael Saunders, if the OBR shows Osborne meeting his target it’ll be thanks to two factors: lower debt interest payments (thanks to lower gilt yields than previously expected) and the transfer — announced a fortnight ago — of the interest accrued on the assets purchased by the Bank of England as part of its Quantitative Easing programme (known as the ‘Asset Purchase Facility’ or APF).

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The below graph, with figures from Citi Research, shows how these effects could help Osborne stick to his fiscal rule. The red line shows what the OBR’s new forecast might look like without the above effects; the yellow line shows how it’d look with them included. Not only is the debt-to-GDP lower as a result, but — crucially — it falls (very slightly) from 2014-15 to 2015-16.

Saunders says that ‘the APF transfer and prospective saving in debt service costs probably will keep the Chancellor on track to hit the debt target even with a sizeable revenue shortfall driven by sluggish nominal GDP growth’.

Considering how embarrassing it’d be for the Chancellor to miss his own target, and how unpopular it’d be to have to implement further austerity to meet it, this really would be a miraculous escape by Osborne. We’ll find out in 12 days.

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Show comments
  • dalai guevara

    The ‘transfer’ of surplus BoE QE into the treasury’s hands as a good news story that signals turnaround? You chaps must be out of your effing mind.

    • the viceroy’s gin

      Hey, it’s no different than you eco moonbats forcing the public to pay for uneconomical windmills, which only serve to drive up their utility costs.

      So look at it that way… we haven’t been able to spell out your windmill stupidity to the likes of you, so no sense wondering why QE is such a hard spelling slog for others.

      • dalai guevara

        Apples and pears time?
        One will get you on track to gradual energy independence (who said it’s free?), the other will make your savings inflate away and your kids the biggest debtors in history of UK mankind.

        Somehow I knew fruitcakes like you could not see the differnce…

        • the viceroy’s gin

          Like I say, for you the poorly educated and thick, spelling is always a difficult matter, no matter which words involved.

          It is amusing though, watching the spelling challenged pot calling the spelling challenged kettle “black”.

          • dalai guevara

            closet fruitcake?

            • the viceroy’s gin


  • Swiss Bob

    QE is nothing but plain old theft, it is theft from those who actually ‘earn’ their money by counterfeiters running printing presses. It is the State stealing from the public.


    Give the boy a monocle and he could have a second (successful!!) career as half of a Ray Alan and Lord Charles tribute act.
    The only thing to sort out is who’ll stick their hand up his backside and pull the lever?

    Go-ul’o’geer anyone?

  • the viceroy’s gin

    So its taken massive rounds of QE, and enough book cooking to make the Iron Chef proud, and only then, barely, can the Cameroons claim that in 3 years they may be able to slow down the indebtedness train.

    That is to say, they MAY be able to slow down that debt train. Problem for the Cameroons is, they have to keep up the massive rounds of QE, else the debt train is back at full speed again. And then there’s the economy.

    • Daniel Maris

      Are you sure you’re qualified to pronounce on the economy Viceroy? You’re not a professional economist are you? :)

      • the viceroy’s gin

        Well, closer to a professional economist than you’ll ever be to a power engineer, son.

        Remember, dealing with matters fiscal is also something a bit beyond you technical illiterates.

  • Kevin

    the APF transfer and prospective saving in debt service costs probably will keep the Chancellor on track to hit the debt target

    How? Presumably the APF transfer is a debt.

    • the viceroy’s gin

      Yes, but it’s government debt, and not “public” debt. That’s the technicality by which the Cameroons hope to trick everybody.

      • Daniel Maris

        Yes, but you’re not a professional economist so this is just a heap of what you referred to as “bovine excrement” on another thread. I mean, have you actually spent several years studying government accounting of debt?

        • the viceroy’s gin

          Yes, I have.

          Would you like me to refer you to data describing the buildup of government and public debt, to a couple decimal places, by real terms and percentage of GDP?

          Not that I think you’d understand what you’re looking at, because I doubt you do.

  • HooksLaw

    Why don’t you include a graph of where we would be with higher interest debt? That would be just as meaningless as complaining that it is lower.
    Since all you are doing is repeat a thread of a few days ago its clear you are short of conversation down at the pub.

  • William Blakes Ghost

    Ah so george is relying on the oldest of economic practices. Wehen in trouble cook the books! Nice one George!

    • telemachus



      “Fresh from his success nationalising the Post Office pension, which
      artificially knocked £23 billion off the national debt, the Chancellor has come
      up with another manoeuvre which effectively adds £35bn to the total of QE——In fact £35bn upfront and a further £15bn or so per year thereafter”

      Is this not just fraudulent accountancy?

      Further this is to be analysed by the Governments own sausage machine-the OBR

      Remember the mantra

      “Lies, damned lies and OBR statistics”

      The government set up the Office for Budget Responsibility to supposedly provide
      “independent and authoritative analysis” of Britain’s public finances.

      The bad meat they are provided will make bad sausages

      • HooksLaw

        No, lies damn lies and Gordon Brown budget statements.

  • Troika21

    He might not have cooked the books, but at this rate its only a matter of time before he enters Gordon Brown territory for ‘Golden Rule’ breaking.

  • Span Ows

    Well well. No worries, here and the BBC and other media will spin it otherwise, wouldn’t want hoi polloi to think anything good about Osborne would we?

    • 2trueblue

      Just because we had the ‘fixers’ in for 13yrs. impossible to think that something might be real. Will we ever get over it? We have our main media bought and paid for by the left so what do we know? Who knows who owns us? Sold out by Liebore on every level and to everybody, this country is not as safe and it is no longer ours.

  • Daniel Maris

    The Social Secretary for the Bullingdon Club strikes again…

    When will it occur to those who matter that he’s simply not up to the job and that in fact he is a negative influence on the economy’s performance.

    • 2trueblue

      And you think that Liebore served us well on the economic front? 13yrs of boom, boom, boom and where did we go? Go figure. We did not get here on our own, we had the very best, Blair, Brown, Balls, Millipede, and Whelan, and they gave us the most corrupt parliament for decades. Don’t you just love pure politics?

    • Chris lancashire

      Oh dear, standard refuge of the Left when confronted with unpalatable truth; call on the Bullingdon Club. Pathetic.

      • Daniel Maris

        There is something about his arrogance that makes the Bullingdon Club a v. relevant reference point I’m afraid. Also, I think the fact that he was Social Sec is rather instructive. He’s a little fixer, not a serious thinker or a serious policy man or a serious custodian of the economy.

        I don’t reference Boris’s Bullingdon antics.

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