Outlook It seems a long time since Labour and the Conservatives spent the election campaign trading insults about when to start cutting the deficit. But what has happened to those £6bn in efficiency savings that much of the row concerned? Having got their way on the need to make those cuts this fiscal year rather than next, the Conservatives ought now to be seeing some of the benefits. Yesterday's public borrowing figures suggest not.
Though monthly data on the public finances is notoriously volatile, yesterday's figures can hardly have been the Christmas present George Osborne washoping for. Or expecting, for that matter, since last month's £23.3bn borrowing requirement was roughly a third more than the City had been expecting. If the Chancellor continues to borrow at this rate, his end-of-financial-year forecast for a deficit of £149bn looks seriously under threat.
The data look gloomy on both sides of the accounts. Tax receipts have begun to rise, but nowhere near as quickly as hoped. Spending, meanwhile, has been much higher than expected – and not only because of rising debt-interest payments, which would in any case have been predictable.
The most depressing thing about yesterday's figures is that the backdrop to the deterioration of the public finances is an economy that is performing better in calendar year 2010 than we had expected. The Office for Budget Responsibility (OBR) now thinks growth will be 1.8 per cent this year, compared with its summer forecast of 1.2 per cent. So why are the borrowing figures not showing a similar improvement?
For now, we can but hope that November proves to have been a rogue month, for there is not much hope of a return to undershooting forecasts in 2011. For next year, the OBR has lowered its growthprojection. And if Mr Osborne can't hit his borrowing targets at a time when the economy is doing better than anticipated, what hope is there for a period when the reverse looks likely to be true?Reuse content