UK borrowing falls to £8bn as France heads back towards recession

New figures show the UK is shaking off its debts. No such luck for our cousins across the channel.

by Emma Haslett

It’s been a good week for George Osborne. So far, he’s managed to foist any blame for the Co-op Bank scandal onto his enemies, he’s been given a pat on the head by the OECD – and now he’s published figures showing the UK’s public finances are actually in pretty good shape – or at least as good a shape as they can be, considering the circumstances. All before Thursday afternoon.

According to monthly figures by the Office for National Statistics, government borrowing fell to £8.08bn in October, down from £8.24bn the year before. And that’s without the £2bn Royal Mail flotation being taken into account (although it also excludes the cost of interventions like bank bailouts).

Alas, that hasn’t prevented public debt from edging up to £1.207tn, or 75.4% of GDP – up from last year’s figure of 72.6%, although down from last month’s 75.9% (which itself was the highest it’s ever been – or at least since the ONS’ records start in 2004). So Osborne doesn’t get off completely scot-free.
Nevertheless, the UK’s budget deficit (the difference between how much the government is taking and how much it’s spending) dropped to £64.5bn, down 8.2% on this time last year.

And although the UK’s total borrowing figure is expected to hit £105bn by the end of this tax year, tax receipts reached £48.7bn by October, 3.2% more than last year. The ONS put that down to the recovery of the housing market – stamp duty receipts were up more than 45%. So even if there is a housing bubble, at least it’s been good for someone.

The British Chambers of Commerce, though, wasn’t impressed. David Kern, the organisation’s chief economist, said the pace of deficit reduction is too ‘modest’ for his liking.

‘Corporation tax receipts were lower than at the same point in 2012, and the job of repairing our public finances is still a major challenge,’ he said.

That’s as may be – but we’d wager the UK’s corporation tax receipts will still be higher than in France, where the recovery isn’t going as planned. According to a report by Markit economics, the French economy shrank by 0.1% in the third quarter – and is expected to shrink again in the fourth quarter, meaning France is back in recession.

The report also showed private sector business activity had contracted: the purchasing managers’ index fell to 48.5, from 50.5 in October and September (any figure above 50 indicates an increase in activity). The services activity index dropped to 48.8 from 50.9, while the manufacturing PMI fell to 47.8, from 49.1 in October. Private sector unemployment increased for the 23rd month in a row.

It’s bad news for disaster-prone French president François Hollande, who over the past few weeks has faced a credit rating downgrade from Standard & Poor’s, a rebellion from French footballers and mass chou-fleur protests by Breton farmers. This is another one to add to his list. MT would suggest Hollande may be saying au revoir sooner than he had anticipated… 

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