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Labour underestimated Osborne’s deficit

22 November 2012

As Fraser reported at the time, Labour put up a deficit clock on its website last month, claiming that the government was borrowing £277 million more during Tory conference than in the same four days last year. It based this on the borrowing figures available at the time, which were for the period April to August. In that period, the government had borrowed £802 a second more than in the same five months of 2011, so Labour assumed it would continue to do so in October.

But new figures out yesterday show that this was not the case. In fact, looking just at borrowing in October, Labour was lowballing it by about £67 million. The ONS says the government borrowed £8.6 billion in October 2012, £2.7 billion more than the £5.9 billion it borrowed in October 2012. That works out at an extra £996 a second, or £344 million over four days. Remember, though, that the monthly borrowing figures end up being revised by an average of £1.7 billion.

On the other hand, if you take total borrowing in the financial year to date (April to October) — a better way of judging whether the deficit is rising or falling than looking at an individual month — the picture is not quite as bad for George Osborne as Labour made out. In the seven months since April, the government has borrowed £45.3 billion, £23 billion less than in the same period last year. But that includes the distorting effect of the Royal Mail pension transfer, which artificially lowers the deficit by £28 billion. Adding that £28 billion back in puts borrowing so far this year at £73.3 billion — £5 billion higher than last year. That means the government has so far been borrowing an average of £273 a second more than in 2011, which would work out at ‘just’ £94 million over four days. Still, not great for a government that’s supposed to be all about getting the deficit down.

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So will this year’s deficit be higher or lower than last year’s? The consensus forecast is that, stripping out the Royal Mail pension effect, it’ll end up slightly above 2011-12’s £122 billion. The average independent forecast for public sector net borrowing in 2012-13 is £100.3 billion — or £128.3 billion with that £28 billion added back in. In March, the OBR forecast that this year’s deficit would be £120 billion, very slightly lower than last year’s. But just three of the 30 independent organisations from whom the Treasury collects PSNB forecasts think it’ll come in lower, suggesting the OBR will have to join the other 27 when it makes its new forecasts in a fortnight.

And after all that borrowing, government debt now stands at £1.069 trillion, or 67.9 per cent of GDP.

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  • andagain

    As Fraser reported at the time, Labour put up a deficit clock on its website last month, claiming that the government was borrowing £277 million more during Tory conference than in the same four days last year.

    The point of showing off a deficit clock is to support demands for spending cuts or tax rises. Which is Labour demanding?

    If neither, they should not have a deficit clock on their website.

  • Span Ows

    How do labour (and their broadcast arm the BBC) have the gall to trumpet this over borrowing and in the very next breath complain about cuts? Does not compute!

  • Daniel Maris

    A lot of tosh is being talked on this thread. Sweden’s tax receipts as a percentage of GDP are about 30% higher than our own and Sweden is often held up as a model of good economic management in recent times.

    We need a higher tax take so we can really eat into the debt, tackle the absurd levels of inequality in the country, and rebalance our economy.

    • commonsenseobserver

      Perhaps you’d like to get their natural resources first.

      Perhaps it is being held as a model of good economic management not because of where it is, but where it’s heading.

      • arnoldo87

        Is Sweden really that rich in natural resources? I know about the timber and hydroelectric power and some mineral wealth, but they have very little coal oil or gas. What they do have, unlike the UK, is a strong engineering base.

        • Daniel Maris

          Looking at the export tree map on Wikipedia, I’d say about 25% of its exports (which are 50% of GDP) relate directly to natural resources. The UK’s looks more like 12% of exports.

          Sweden undoubtedly has some blessings – but it also has some impediments e.g. climate, far worse than our own.

  • HJ777

    Pity Labour didn’t put up a deficit clock when they were in power.

    Perhaps they couldn’t find one that would count enough?

  • Noa

    Labour couldn’t, or wouldn’t, count public expenditure whilst they were in power, so who cares that they continued to miscount when they were out of office?
    They can’t complain anyway. Let’s not forget these are the clowns that increased public spending is the answer to ‘austerity’.

  • redrum

    They need to go much further much faster in my view. The State interferes with far too much of my life one way and another. Just get out a blank sheet of paper, ensure that the defence of the realm (the most basic requirement of any government) is covered, and then build back up by necessity. All this fannying around the edges isn’t going to get us anywhere. I personally think we need a bit of Canadian “grip” and fast. Statism is driving me nuts and stifling any urge towards creativity in the economy.

    • HooksLaw

      Our defence is covered for by membership of NATO, we are one of the biggest defence spenders in the world.

      Your notions are preposterous.

      When you or your family are sick and or old you will not be talking about the state fannying around, you will want to see state spending looking after you.

      Absurdly you do not seem to think that you, your wife your parents your children will ever be ill old or vulnerable. You do not seem to think that your children grand children will benefit from access to good education.

      Health education welfare – take a look at how much that takes in govt spending. The trouble is that the siren voices of the socialists say what a good thing all this is but regularly refuse to provide an economy which can afford its desires without excessive borrowing and we want the benefits but do not want to pay for them.

  • HooksLaw

    The government is cutting its own non discretionary spending. That is the only way it can cut the structural deficit, which is in fact what it promised. Cyclical deficit is the result of the econopmic cycle which is taking an international battering, with the Eurozone now going into recession.
    A supposed intelligent commentator might be expected to bring these things into the discussion.

    • TomTom

      The Government has RAISED TAXES to reduce its deficit and thereby proven the Paradox of Thrift by FORCING the household sector into deficit and dis-saving and distress borrowing to keep afloat. Osborne is a Statist who believes ALL Incomes belong to The State so households must cut all spending in anticipation of Higher Taxes as ONLY households pay Taxes

      • HooksLaw

        The govt took the route of 20% taxes to 80% cuts in reducing the deficit. Non discretionary departmental spending is being cut by around 25%.

        It is absurd (though we should not be surprised, given the level of intelligence displayed around here) to expect 25% cuts to be administered instantly. This is why it was so disastrous for Brown to turn on the spending taps. Indeed if it the govt were cutting so swiftly then there would be some justice to the charge tbhat the govt are choking off recovery.

        The govt are being sensibly cautious in spending 5 years to implement the cuts. It gives time for the economy to rebalance and does not instigate the sort of massive social suffering and unrest we see in Greece

        • HJ777

          Perhaps, but in my opinion, it was a mistake to raise taxes initially and to implement cuts later. It should have been the other way around.

          What’s more, if you look at the figures, so far, current account spending has continued to increase – it is in areas like capital spending where there have been substantial cuts.

    • Daniel Maris

      China has had unbroken growth for about 35 years. The USA, apart from 2008, has had unbroken growth for about 75 years.

      We aren’t really talking about cycles are we?

      If we experienced growth of 4% we would be talking about a boom. If China experiences a growth rate of 4% we talk about a looming crisis.

      I am not convinced that business cycles really account for deficits. We need to think more in terms of well managed and badly managed economies.

      • HooksLaw

        Of course we are talking about cycles – even when there is growth it is not even.
        Here is a history of US recessions.

        But you are right – you do not convince.

        • Daniel Maris

          That link just confirms what I said: (a) there is complete confusion about the cyclical theory and (b) there has only been one (brief) true recession since 1937 in the USA.

          But of course, just to say that, shows what a ridiculous notion this is, given the USA is so huge. It is a quirk of history that it is considered as one economy rather than 50. Through most of its history parts of the USA have been in relative decline in relation to other parts and sometimes in absolute decline .

          Also, talk of cycles based on GDP is hopeless (as we see at the moment) in describing what is happening to most people’s real wealth and income. We’ve had huge productivity gains over the last 20 years but v. little of that has filtered down to working class and lower middle class people.

  • HooksLaw

    Its not the Osborne Austerity. Its the Brown Inheritance.

    Another example of you setting an agenda.

    • dalai guevara

      The Telegraph just released Georgie Porgie’s job interview details with the big banks yesterday, his prospective new employers, given that he failed to deliver anything of substance for his current employer, the electorate.

    • telemachus

      The Brown Inheritance was Growth
      Osborne choked it off
      Therefore tax revenues plummeted and the deficit increased
      Osborne learned his economics in Athens
      Let us have a new beginning to stoke growth and have the revenues rollong into the Treasury
      We owe it to our grandchildren

      • Daveyyy12

        Don’t be silly…

        George has actually not stopped spending that is why we are borrowing more and more everyday. Not just here, across the entire western world. All scared to stop spending because they are scared of what will happen.

        Let us have a new beginning to stoke growth and have the revenues rollong into the Treasury..

        The stupidity of the left is infinite.

      • TomTom

        Gordon Brown was a Dimwit like Philip Snowden – another Labour Hero

      • Telemachus the Teletubby fiend

        Telemachus, Browns growth was an illusion. It was borrowed money, all of it, including the QE that stoked a mini boom before an election. It was all smoke and mirrors, and how the economy is now, is how the economy was then. No one had any money to spend, no businesses had money to invest in new nfrastructure or staff. Now we have to deal with his legacy for generations.

        • HooksLaw

          This I can agree with.

      • HooksLaw

        Brown put an ever growing number of British people out of jobs and onto benefits. Despite growth he increased the deficit, this is something which makes it absurd for Labour to say that more spending would lead to growth and a lower deficit.

        • telemachus

          The Yanks have shown that stimulating growth has pump primed a sustainable recovery

          • HooksLaw

            No its not sustainable since they are now faced with making massive cuts to all that stimulus and they are arguing amongst themselves that it will tip them back in to recession.
            Again you talk gibberish.

            Meantime the Eurozone is heading more steeply into recession.

            None of this will help us here at home.

            • finwec

              Wrong, the cuts are not from the stimulus, they’re from entitlements which have nothing to do with the stimulus, from defence, and will be paired with tax increases, either through increased tax rates on higher income individuals or reduced tax reliefs. The stimulus involved infrastructure spending, funding to states to preven mass layoff of employees, and short term tax cuts for lower and middle class workers.

      • HJ777

        No – the figures clearly show that tax revenues have risen under Osborne (after plummeting in the last two years of Labour). You goyt it eaxctly the wrong way around.

        Here are the figures:

        2007/8 – £516bn
        2008/9 – £508bn
        2009/10 – $477.8bn
        2010/11 – £528.9
        2011/12 – £550.6

        He got his priorities wrong, in my opinion. He should not have increased taxes – he should have cut spending.

    • 2trueblue

      Love the headline. Liebore have no idea how to account for our money, they just left us without any, which as you say is the Brown inheritance.

    • HellforLeather

      I hate the Brown Legacy. But, Osborne hasn’t a clue how to deal with it.

      He’s endorsed surging spending and debt; printing money — Mugabe-style (QE)!

      This government, for which (I apologise) I voted for, are flailing — for lack of discipline, and because they tried to proclaim an “austerity” agenda when it has been anything but that.

      Talk of setting an agenda? This Conservative-led rot-bunch have lied, and lied, and lied about all of this. Look closely at that spending; in the following link:

      • telemachus

        So dare I suggest the solution is to listen to Balls
        Or better give him the reins

        • Noa

          He’ll be gone in 2015, the voters in O’wdham will unite to toss him off.

  • LB

    Lies. Its all lies. Page 4.

    4.7 trillion – not billion hidden off the books. What a million in extra debt when you are running the biggest ponzi going.

    • HooksLaw

      Future pension entitlements, like a WW3 which might never happen, is not debt. We are not paying interest payments on 4.7 billion.
      You blather on but ignore that everyones, yours included, payments would go up massively if you had your way and of course that would take huge sums out of the economy, to sit – where?

      • Daveyyy12

        They are promises that will have to be broken by telling people the truth of trying to inflate the debt away.

        • HooksLaw

          No its money that will be paid for by our grandchildren in the future – and the future is unknown, we may if fact be incredibly nwealthy and can afford the pensions.
          In fact the govt is raising the pension age because of the expected costs in the future.
          Your alternative is to impoverish us now and risk destroying the ability to create wealth in the future.

      • TomTom

        Half the world’s banking assets are in the Shadow Banking System outside the regulated sector – $67 Trillion – London is the centre of much of this unregulated activity and it is this funk money that has destabilised the economic system and is the reason for the global banking bailout

        • HooksLaw

          What has this got to do with taking 4 trillion out of the economy to allegedly cover for future pension entitlements?

          The so called Shadow Banking System occupies about 25% of the total sector. It may well have been ‘a’ cause but to say ‘the’ cause is to take an easy way out. RBS is not a ‘shadow’.

          London is the centre for just 9 trillion of this money compared with the Eurozone 22 trillion and USA 23 trillion. (Reuters)

  • CaptBlack

    What are spending this money on?

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