George Osborne has failed in his deficit reduction ambitions - and the Tories are likely to pay a price at the ballot box

The plan was to start paying off the national debt by the end of this Parliament


Dealing with the public finances was one of the main claims to fame the Tories made before the May 2010 election. Trust us, they said, we will impose our austerity and cut the structural deficit faster than Lewis Hamilton can drive his Formula One car round a race track. We are the capable ones, they said, compared with that profligate Labour lot who were responsible for the collapse of the subprime housing market in Detroit, California, Ireland and Latvia. It was Labour that caused the global financial crisis by its welfare spending, was the inference. We are the “fixers” of the public finances, was their claim.

The plan, according to the Chancellor, was to start paying off the national debt by the end of this parliament. Indeed, in his emergency Budget statement delivered to the House of Commons on 22 June 2010, George Osborne went as far as to claim: “The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget”. Don’t fall about laughing, dear reader.

The plan derailed. The ONS showed last week that borrowing totalled £11.4bn over the month, higher than the £10.7bn forecast by economists, and £3.8bn more than in June 2013. Excluding the impact of a one-off cash transfer from the Bank of England in June last year, borrowing in the first three months of the 2014-15 fiscal year was £36.1bn, 7.3 per cent higher than the same period last year. Chris Leslie, shadow Chief Secretary to the Treasury, said: “George Osborne is not only set to break his promise to balance the books by next year, he is also borrowing more so far this year than the same period last year. Borrowing is now expected to be almost £190bn more than planned under this Government. This is the cost of three damaging years of flat lining and falling living standards we have seen since the election.” Certainly looks that way.

In June 2010 the Office for Budget Responsibility forecast the structural current deficit would be eliminated by 2014-15 and be even more strongly in surplus in 2015-16. They forecast that public net debt as a percentage of GDP for the following four years would be as follows: 2011/12 67.2 (71.2 per cent ); 2012/13 69.8 per cent (74.2 per cent); 2013/14 70.3 per cent (76.3 per cent); 2014/15 69.4 (q22014=77.3 per cent). The actual figures are in brackets. Robbie Burns was right, the best-laid plans of mice and men often do go awry.

The first chart (above) makes clear how much households have struggled financially under the Coalition; hence the problems for the public finances. It plots answers to the question: “How do you think the financial situation of your household will change over the next 12 months?” Two lines are plotted, the first from YouGov, which plots the difference between the proportion saying “better” and those saying “worse”. So in the latest poll taken between 17-18 July 2014 16 per cent of respondents said better and 36 per cent said worse, so minus 20 per cent would be plotted. To smooth the data I simply take monthly averages. The second line plots a balance using the same question from a monthly survey of consumers conducted by the European Commission.  Here respondents are given a choice of “get a lot better” (BB); “get a little better” (B); “stay the same”; “get a little worse” (W); “get a lot worse” (WW) and “don’t know”. The balance is just BB+B/2-WW-W/2. The higher the number the better respondents think their finances will be.

Several facts stand out. First, the two series tell a very similar story. Second, expectations collapsed in 2007 and, largely un-noticed, were at historically low levels by the spring of 2008; they then recovered sharply through 2009 and early 2010 as fiscal and monetary stimulus took hold. As soon as the Coalition took office, according to both measures, animal spirits collapsed again. In my view this was in large part down to loose – and totally incorrect – talk, as I discussed in last week’s column, by Mr Osborne in particular but also David Cameron and Nick Clegg of austerity and the UK being close to bankruptcy and identical to countries that don’t have their own central bank and currency that they can borrow in. Second, expectations of what will happen to households’ financial situation picked up in 2014 but are still below the levels the Coalition inherited. Worryingly, recently, both measures have ticked back down again.












The second chart takes data from the 1,575 polls undertaken since the May 2010 election, and plots the monthly averages of Labour’s lead over the Tories.  The idea behind taking monthly averages is to simply smooth out some of the daily volatility.

Several facts also stand out. First, Labour’s lead was highest between June 2012 and May 2013 at almost exactly 10 percentage points with the economy in the doldrums. Since then the lead has fallen, as households’ expectations of their financial situation improved, Third, it does appear that the Labour lead has stabilised this year, despite the continued improvement in the economy, and averages out at 4.2 percentage points since the start of 2014 and 3.8 percentage points in July, which are not significantly different from each other. The big question now is whether the downward trend in Labour’s lead over the last year or so will continue.

The problem for anyone wanting to forecast the outcome of the next election is that there may be no relevant precedents. We haven’t had a coalition in the post-war period and we have had an unprecedented collapse in living standards. Prior relationships may not hold. It is generally assumed that poll leads narrow as the election date approaches but as has been shown by Rob Ford, Will Jennings, Mark Pickup and Christopher Wlezien, the academics running the Polling Observatory project, that isn’t always the case.

On average, they find, over the 14 general elections since 1955 the average swing from opposition to government over the last 12 months is 2.7 percentage points. But on four occasions (1959, 1979, 1983 and 1992) the swing was in the opposite direction, away from the government.

In 1997, rising economic optimism did nothing for the Conservatives because people gave them no credit. The authors conclude: “So while an improvement in the Conservatives’ relative position is historically likely, it is not certain, and it is unlikely to be a dramatic shift.”  What happens to living standards is going to be crucial.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Helpdesk Analyst

£25000 per annum: Ashdown Group: An established media firm based in Surrey is ...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Head of Finance - Financial Director - London - £70,000

£70000 per annum: Ashdown Group: Head of Finance - Financial Controller - Fina...

Recruitment Genius: Business Development Executive - Nationwide - OTE £65,000

£30000 - £65000 per annum: Recruitment Genius: This small technology business ...

Day In a Page

Read Next
Ice skating in George Square, Glasgow  

How many Christmas cards have you sent this year?

Simon Kelner

Al-Sweady Inquiry: An exercise in greed that blights the lives of brave soldiers

Richard Kemp
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum