As markets react badly to political developments in Europe, the Office of National Statistics (ONS) has announced that whilst spending in March 2012 was higher than expected, at £18.2bn, the country actually hit its borrowing target of £126bn for the full year. One year of austerity down, five to go.
The figures mean that total public borrowing was down £11bn on the £136.8bn borrowed in 2010-2011. This is great news for George Osborne, whose hard line on austerity has been met with hostility from elsewhere in the political landscape. This spending leaves net national debt at £1022.5bn, equivalent to 66.0 per cent of GDP. The government’s plan to eliminate the deficit by 2016-17 appears to be bearing some fruit.
The news comes as markets took a battering because of doubts about the eurozone. Wall Street fell 0.8%, German shares fell 3.4%, French stocks dropped 2.8% and UK stocks dropped 1.9%, following concerns over the resignation of the Dutch prime minister, Mark Rutte, and François Hollande’s first round victory in the French presidential elections. What will happen to the Franco-German ‘Merkozy’ euro-consensus if a socialist winds up as French president? We don’t know, but the bond markets at least are unlikely to react well…
So the borrowing figures are encouraging, but the UK economy is heavily reliant on international trade and is not insulated from major wobbles in global markets. If the eurozone falls off a cliff, our austerity plans may turn out to have been in vain.