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.
International Women's Day 2014: The shocking statistics that show why it is still so important
Feminist quotes to inspire you on the International Women's Day
Belle Knox: How the porn star student from Duke University became bigger than Justin Bieber
International Women's Day 2014: Mothers and daughters describe their hopes and dreams in touching photographs
Liam Neeson on death of wife Natasha Richardson: ‘When I hear the door opening, I still think I’m going to hear her’
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Academy members voted for Oscar-winning 12 Years A Slave 'without watching it'
- 3 Orgasm machine to deliver climax at the push of a button
- 4 Liam Neeson turned down James Bond role to marry Natasha Richardson
- 5 Livr: A social network only for drunk people
£12000 per annum: Inspiring Interns: A small but growing chain of boutique hot...
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£45 - 60k Per Annum: Charter Selection: Highly profitable leisure brand, marke...
£30000 - £50000 per annum + Highly Competitive Salary: Austen Lloyd: Residenti...