Smoke and mirrors? A real boost for Chancellor? Or is £35bn Bank deal just an accounting exercise deal?
George Osborne has been accused of resorting to “smoke and mirrors” to give himself a fighting chance of hitting his self-imposed debt reduction targets.
The Government announced that the £35bn in cash that has accumulated at the Bank of England in recent years as a by-product of the monetary authority’s £375bn money printing programme will be transferred to the Treasury and used to reduce the annual budget deficit over the next two years.
It is essentially an accounting exercise, since the Government is likely to have to pay back the money to the Bank eventually, but some analysts suggested the move might allow the Government’s fiscal watchdog, the Office for Budget Responsibility, to declare next month that Mr Osborne remains on course to meet the second part of his “fiscal mandate”, which he was widely expected to miss.
“This smoke and mirrors will fool nobody” said Rachel Reeves, Labour’s shadow Chief Secretary “The Chancellor seems to think he can just be bailed out in the short term by money from the Bank of England”. The Trade Union Congress urged the Chancellor to spend the £35bn, in order to create jobs and assist the still weak economy, rather than using it to reduce public borrowing.
On 5 December the OBR will decide whether the Chancellor is on course to eradicate the structural deficit over the next five years and to put the stock of public debt on a downward path between 2014-15 and 2015-16. At the time of the March Budget the OBR ruled that Mr Osborne was on target on both counts, but since then public borrowing has risen as Britain slipped into a double dip recession. This prompted the International Monetary Fund and other forecasters to assume that the public debt part of the mandate would not be met.
But this latest accounting change is expected to reduce both the size of the recorded deficit and the also the outstanding public debt between now and the end of the Parliament. “[This] may just be enough for the OBR to project that the government will probably hit its target of falling debt/GDP ratio in 2015/16 whereas previously that appeared out of reach” said Michael Saunders of Citigroup.
Emergency call 'started off dumb, but got pretty serious'
Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'
Thought you'd seen it all after the Jeremy Paxman interview?
Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent
"History is violent," says the US Army tank commander Don "Wardaddy" Collier
Striker's four-month ban for biting an opponent expires on Friday
Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here
- 1 This 'woman calls police to order pizza' story isn't going where you're expecting
- 2 Watch what happened when food critics were unknowingly served McDonald's
- 3 Jimmy Carr's controversial Oscar Pistorius joke goes a bit too far at the Q Awards
- 4 Ottawa shootings: Bruce MacKinnon's cartoon is the perfect tribute to soldier Nathan Cirillo
- 5 Of course, teenage girls need role models – but not like beauty vlogger Zoella
Isis releases first video showing the stoning of woman accused of committing adultery as her father shouts 'don't call me Dad'
This 'woman calls police to order pizza' story isn't going where you're expecting
FCKH8: YouTube reinstates provocative anti-sexism video showing young girls swearing
Diwali: What is the festival of lights – and how is it celebrated around the world?
Jimmy Carr's controversial Oscar Pistorius joke goes a bit too far at the Q Awards
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Residents should throw a street party and mix with immigrant neighbours, councils told
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £33600 per annum: Randstad Education Manchester Secondary: The Job:Te...
£110 - £130 per day: Randstad Education Preston: the job ? We are looking for...
£120 - £162 per day: Randstad Education Hull: Secondary English Teacher Requir...