Ben Chu: It will soon be crunch time for Osborne's rules
Outlook After those atrocious July public-borrowing figures: what next? A hefty revision of the 2012-13 deficit forecasts made in March by George Osborne's watchdog cum forecaster, the Office for Budget Responsibility looks likely.
The OBR jutted out its chin yesterday and declared that the advancing army of disappointing borrowing data could yet be repelled. "It is too early to judge whether full-year, central government expenditure will overshoot the forecast," it declared.
But this lacks credibility given that after just four months of the fiscal year, the Government has already borrowed £45bn out of its £120bn target. That puts the Government on course to borrow north of £150bn in 2012/13 according to some City analysts.
And the OBR is, of course, no stranger to revisions. It has increased its borrowing forecasts repeatedly since it was established after the last election. The crunch will come in November when the OBR will be required to give its economic update at the time of the Chancellor's autumn statement.
Yet what's even more interesting is whether the OBR will conclude, once again, that the poor economic data this year means the UK's structural deficit is larger than it previously thought. This is what OBR head Robert Chote and his small team concluded in November 2011.
The upshot was that the Chancellor was compelled to pencil in another £15bn in public-spending cuts for the next parliament in order to meet his fiscal mandate of eradicating the current structural deficit over a five-year horizon.
If Mr Chote and co serve up more of the same in November, Mr Osborne will have to wield the axe once again.
And there's an even bigger headache for Mr Osborne. The OBR might well conclude that the Treasury is also on course to miss the second part of the Chancellor's fiscal mandate: to make the national debt fall as a share of GDP by 2015-16.
The Chancellor can meet the first part of this by pushing spending cuts out to the next parliament. But there's no such flexibility on part two. If the OBR concludes that the Chancellor is off target, he will have to come up with more cuts to take place before the next election. Or, of course, he could decide to scrap the target altogether.
Watch this space: make or break time for the Chancellor's fiscal mandate is fast approaching.
- 1 Scottish referendum: So how about the English now being given a chance to split from England?
- 2 Friends 20th anniversary: Alison Jackson photographs reunited cast
- 3 London council removes 'unacceptable' Stamford Hill posters telling women which side of the road to walk down
- 4 The response to my Pizza Express review has been overwhelming, and taught me a lot about journalism
- 5 Free U2 album: How the most generous giveaway in music history turned into a PR disaster
Scottish independence referendum: Frankie Boyle reacts to nation's 'No' vote - 'To be fair, I've always hated Scotland'
London council removes 'unacceptable' Stamford Hill posters telling women which side of the road to walk down
Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
Scottish referendum: Police struggle to control Unionist rally in Glasgow's George Square
Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Archbishop of Canterbury admits doubts about existence of God
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...