This morning didn’t start well for the Government. Gloomy news on retail sales (down again), mortgage lending (down again), and business borrowing (down again) was swiftly followed by Office for National Statistics figures on public sector borrowing – which soared to a record high of £19.9bn in May. Not many green shoots to be found there. However, there was one bit of good news: disgraced former RBS boss Sir Fred Goodwin, who’s spent the last few months lying low, has apparently offered to cut his pension pot by £4m…
According to the BBC, Sir Fred has offered to reduce his pension by £200,000 a year, leaving him to struggle by on a measly £350,000 or so – plus the £2.7m he’s already taken out as a lump sum. (This concession may or may not be something to do with the fact that the News of the World has sniffed out his hideaway in the south of France, with the kind of public-spirited alacrity it normally reserves for paedophiles). All in all, this would cut the value of his pension pot by about £4m – thus saving the taxpayer-owned bank a bit of cash, and possibly diffusing some of the row that’s erupted since the details of his pension emerged. The Beeb reckons RBS will probably accept the deal – and since it doesn’t seem to have too much of a leg to stand on legally, as far as we can see, we’re not hugely surprised.
Sadly, £4m rather pales into insignificance compared to the enormous hole in the public finances. The ONS revealed today that the Government borrowed a record £19.9bn in May – meaning that we’re already in hock to the tune of £30bn after just two months of the financial year. That’s twice as much as at the same point last year, and suggests that Chancellor Alistair Darling’s full-year estimate of £175bn is hopelessly optimistic. Total government debt now stands at about £775bn, equivalent to 55% of GDP (and 25% higher than it was this time last year), while the budget deficit soared to a record £17.5bn.
The double whammy of dwindling tax receipts (corporation tax was down a whopping 27% year-on-year, for instance) and higher spending (partly thanks to all the extra benefits being paid out) has clearly left our public finances in a shocking state. And what’s worrying economists – including Bank of England governor Mervyn King, judging by his Mansion House speech last night – is the apparent absence of any plan to start paying this enormous debt back. All the Government seems interested in at the moment is trying to score cheap political points by banging on about Labour investment vs Tory cuts. Figures like these suggest the question is not whether to cut spending, but how big those cuts should be.
Either way, none of this bodes very well for our chances of a rapid recovery...
In today's bulletin:
Goodwin offers to reduce pension pot as borrowing soars
BA pilots' union agrees to swap salary for shares
H&M looks to buck retail slump with designer Choos
Why unemployment has a six-month shelf-life
Race to improve diversity bearing fruit