Given that one of the central tenets of George Osborne’s economic philosophy is reducing the public spending deficit, it is about time that it showed some signs of getting smaller. On Tuesday it did just that, but by the tiniest amount. The government borrowed £120.6bn in the financial year to April 2013, which was about £300m less than the previous year, according to the Office for National Statistics (ONS).
Monthly borrowing in March fell by a more encouraging £1.6bn to £15.1bn, but only if you exclude government interventions such as bank bailouts. This would be all well and good if the chancellor hadn’t also set himself a (already extended by two years) target of 2017 to eliminate the budget deficit altogether.
Public sector debt now stands at £1.2 trillion, which is around 75.4% of the UK’s GDP, and the largest it has ever been. If the deficit continues to shrink at this piffling rate, it will literally take millennia to get rid of it.
But things are only going to get tougher for Osborne. GDP figures, due to be released later this week, are expected by many analysts to show that the UK is back in recession – a triple-dip – thanks in part to weak retail and construction figures because of harsh winter weather.
Add to that, the clamour for Osborne to loosen up on austerity more generally is growing. Even the European Commission president Jose Manuel Barroso has come out arguing that European countries are reaching the ‘limit’ of what is politically acceptable. He said that austerity policies need to have ‘acceptance, politically and socially’.
He added: ‘While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.’
We suspect Barroso is referring mainly to the suffocating PIIGS countries whose European bailout packages required them to implement near-impossible budget cuts to qualify for the rescue money. But his comments no doubt apply to the UK, where the ‘Keep Calm and Carry On’ resolve of Britons is being tested by an economy that hasn’t grown by any meaningful amount for almost six years.
If the economy has dipped again when the GDP figures land, Osborne will find it difficult to blame the weather or the depressed eurozone yet again. Ed Balls’ calls for ‘Plan B’ will be their loudest yet…