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Deficit falls by 0.3%… maybe

23 April 2013

George Osborne will be breathing a sigh of relief this morning. The boast he made in his Autumn Statement in December — ‘the deficit is coming down this year, and every year of this Parliament’ — appears to have held up. But only just.

The figures from the ONS today show that the government borrowed £120.9 billion in 2011-12 and £86.2 billion in 2012-13. But that 2012-13 figure is artificially lowered by £28 billion by the Royal Mail pension transfer, and by a further £6.4 billion by the cash transferred to the Treasury from the Bank of England’s Asset Purchase Facility. Strip out those two effects and borrowing in 2012-13 was £120.6 billion — still lower than 2011-12, but only by £300 million, or 0.3 per cent.


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And even that figure benefits from another one-off effect: the £2.34 billion raised in the 4G auction in February. Without those proceeds, today’s figures would’ve shown the deficit rising.

But it is important to remember that this is just an estimate, and is subject to revisions. From 2007 to 2012, on average, monthly borrowing figures have been revised by £1.3 billion within a year. It’s therefore worth bearing in mind the words of caution from the Institute for Fiscal Studies on Friday:

‘We will not know for some time whether the deficit in 2012–13 was actually higher or lower than the deficit in 2011–12.’

And anyway:

‘It is important to bear in mind that there are no direct economic consequences either way. In economic terms it is irrelevant whether the deficit is slightly higher or slightly lower in 2012–13 than in 2011–12. Either way the bigger picture is the same.’

The importance of today’s figure, then, is not economic, but political.

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  • Gold Bug

    Osborne has the economic knowledge of my Mums cat. He is a big state, Keynesian idiot and actually believes that you can run an economy on permanent deficits. That cannot go on for ever and anything that can’t go on forever, at some point, won’t.

  • Andy M

    I am not Conservative or Labour, but I do sympathise with the thankless task the Coalition has had to undertake, after Labour created this mess along with the banks. However, this level of debt reduction clearly isn’t enough and something else needs to be done. Dropping debt by anything is proof that they are not increasing debt and it is lowering under their government, however it is not going down at a rate that is acceptable – we will still be dealing with this in 30-40 years time at this rate. A country like Britain cannot live in this way for that length of time. There are no easy answers. In an ideal world all debt would be scrapped and we’d start again, however that’s not going to happen. What is obvious though, is that Labour have no substantial alternatives to offer.

  • The Sage

    Whether it’s £120.9 bn or £120.6 bn, these are still truly appalling government overspend figures.
    We cannot go on like this year after year adding to our total national debt before there are very serious consequences. Losing our Triple A rating is just a very early warning that all is not well with this level of borrowing and it can’t continue.
    Let’s cut government expenditure not tinker at the edges. It’s easy if you have the courage to do so. If people don’t like it, then tough.
    As I’ve said before here, any half decent FD could eliminate this overspend in a couple of weeks.

  • HookesLaw

    But the point is in physical money borrowed the deficit has come down.
    Against this we have to face the fact that the Eurozone is in crisis and the world is either in recession or very close to it. So coming through the year without increasing deficit is not bad.

    • jack mustard

      Actually the point is if you strip out special factors, and ignore the £10.9bn “underspend” forced on government departments and the NHS by Osborne, then the deficit is actually rising. This is bad news.

  • Gareth

    It really is time for the Spectator to stop banging on about estimates which may be revised. It does so every time a bad set of economic figures are published – which has been happening frequently. “The true figures might be better.” No! Statistics may change slightly, but it’s entirely unrealistic to believe that the deficit might actually have fallen significantly, or that growth might actually have been strong.

    It is, of course, possible to massage statistics, we’ve seen that from the Chancellor even to get a static deficit level. But the margin of error for statistical estimates is well understood, and procedures for making good economic estimates are well refined and consistently accurate. The ONS knows what it is doing. The Chancellor does not, and it is him you should blame.

    • Makroon

      The ONS does know what it is doing, and knows that a first look survey is far from the last word. The revisions have very little to do with “the margin of error for statistical estimates are well understood” (sic), and everything to do with the fact that the “statistics” (and especially for GDP), are just survey results from partial data.
      Of course there is a campaign in the media, based on these rather unreliable ‘first looks’, to panic Osborne and destroy confidence – guess who benefits from that ?

      • HookesLaw

        The media are an ignorant disgrace. They only exist to whip up frenzy and hysteria to boost their circulation and consider that despite the lies they tell they should be above regulation.
        The tabloids are a disgrace in this respect but the so called qualities (which are anything but) are just as bad. The UK press has been tabloidized

        • Tom Tom

          Yes. You should start a Conservative State Channel to broadcast “News from Boris” of increased car output and heroic struggle of the Tories against the Propaganda of the Left-Wing Media…….go on, start an Internet TV Station

          • Span Ows

            I would if I could have a tax from every TV owner.

      • Gareth

        Yes, they publish initial estimates and a more concrete figure when additional data is available. But are you really suggesting that revised figures will show that the deficit actually fell significantly last year? Or that the economy actually displayed a healthy amount of growth?

        The revised figures are as likely to be worse as better – there is no inherent statistical bias in the early estimates in either direction. I’m not particularly in favour of the Chancellor’s economic approach, but if he was achieving his aims, I’m open-minded enough to give him the credit that would be due. But it seems unrealistic to continually claim that the statistics are misleading when they show the same thing month after month.

        If you think I’m wrong, perhaps you can point me to any key economic statistics from recent times that have been significantly revised in a way that has overturned their initial prognosis?

        • HookesLaw

          The general stabilisers for the economy are doing their work, Thats why the deficit has not come down more. Spending more would clearly not lower the deficit and any growth generated would be meaningless because it would be artificial govt induced stimulus (on top of all the other stimulus going on)

          • Gareth

            To you it might be meaningless. But not to the individuals and families who are struggling to get by because of the lack of jobs. Not to the graduates whose skills are gradually eroding because there are not the opportunities to use and develop them. Not to the businesses which cannot expand or invest because demand for their goods and services remains low.

            • Tom Tom

              Well said

          • Tom Tom

            What are “general stabilisers” ? You do not evenunderstand what you are writing. If you mean Automatic Stabilisers they go up every time a low-wage, part-time, zero-hours job is created. This is the Government like Blair in 1997 that was going to switch people from welfate to work but instead has to pay welfare so they can afford to live in the country in which they work

        • Makroon

          The revised figures for the deficit are invariably an improvement.
          £120B is bad and disappointing, but no more disappointing than when it was announced as a target for 2012/2013, some months ago.
          “City analysts” had apparently pencilled in an outcome of about £117B, which is probably where the final figure will settle. It is a peanuts improvement, but would at least show the (several times revised upwards) targets, are now conservative, and are being achieved.
          IMO, Osborne has been guilty of complacency in his first two years, and the government’s “supply side measures” have too often been bizarre or useless, and lacking in vigour and imagination. I don’t believe Cameron and Osborne’s team of insiders and “advisers” are the best that the parliamentary party can offer, and I despise their cronyism, but we need to keep a sense of proportion.
          You may believe the first estimate for these statistics is useful and accurate, I don’t. We have a constant stream of monthly, quarterly, and survey/PMI estimates, every one of which is an opportunity for shock! horror! headlines and confidence destroying hyperbole.

          Positive news is not news, and the revisions are never reported.

          • Span Ows

            This is very true, I don’t want to keep on banging on about the BBC but it has been shown that they ignore the good figures; similarly they omit the reason for credit agency downgrades who criticise George Osborne for failing to tackle the budget deficit and debt hard enough. GO is hit by the BBC for cutting and hit for not cutting.

          • Gareth

            A agree that the deficit figures are disappointing, You shouldn’t confuse forecasts, which analysts might make, from targets, which can only be set by the Chancellor. His aim, let’s remember, was to eliminate the deficit within five years.

            While net borrowing estimates may be revised up or down, I am still waiting to be shown any recent revisions to borrowing figures which would be large enough to change the conclusion drawn from them – that the deficit has not fallen to any great degree compared to the previous year. In spite of the Chancellor’s repeated claim that his is “dealing with Britain’s debts”, at the moment, despite significant cuts to most governmental departments, he is not.

      • Tom Tom

        There is a campaign in The City to say ONS figures are rubbish and not to be trusted

        • Makroon

          Why would they do that Tom ?
          Nobody disputes that the economy is in a bad way, with slow growth, and a stubbornly high deficit. The ridiculous prospect of the whole nation waiting with dread to see whether Q1 2013 growth (the ONS first estimate, based on about 40% of the economy), tips us into Balls’ famous “triple dip” or a 0.1% increase, is lunacy on a national scale.

          In case anyone has forgotten, this is an exact rerun of last year – the ‘consensus’ then, was +0.1%, with some City types predicting +0.3%, the ONS reported -0.3% (cue shock! horror!) Latest revision for Q1 2012 is -0.1% growth.

  • dalai guevara

    A 45 degree angle is a 45 degree angle. You cannot deny the facts.
    What we also cannot deny is that Osborne is on target to double the debt in one term, with no structural changes to show. He will enter the history books for doing that.

    • itdoesntaddup

      Public Sector Net Debt stands at £2,206.6bn as at end March. That’s down slightly (£20bn) from the £2,226.6bn of Q2 2010, when Osborne took over.

  • Tom Tom

    Why not simply raise VAT to 50% and put it on food to reduce the deficit by another 0.09% ? Surely Osborne could raise some more taxes. This is such fun watching him play with his Deficitometer like something on a Channel 4 gameshow. I cannot believe you publish this twaddle. If this had been a Labour Government you would have been crawling over the Chancellor like maggots – but because it’s is Osborne you salivate over each 0.005% he can shave off by dodgy accounting

    • tele_machus

      You are beginning to sound like Balls

      • Tom Tom

        Hardly. He doesn’t know enough

    • Makroon

      Don’t be such a prat. This is a neutral and pretty decent summary of the situation by JJ.
      The only “salivating” going on here, is by your good self.

      • Tom Tom

        It is a waste of time such an article. It is meaningless. After 3 years the economy is stagnant and sinking. You may live in Wonderland but lots of people have avote just like you and are getting very irritated by Little Lord Fauntleroy and his economic incompetence.

        • Makroon

          Not everyone on here has your superb mastery of economics.
          (A lot of them think Farage is the cat’s whiskers).

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