Osborne's deficit reduction plan remains off track

Borrowing in August reached a record high of £14.41bn.

While the latest borrowing figures aren't quite as bad as expected, they still make grim reading for George Osborne. The August deficit was £14.41bn, the largest figure on record for that month and further evidence that the Chancellor's deficit reduction plan has stalled. Borrowing so far this year (April-August) is £59bn, 22% (£10.6bn) higher than in the same period last year.

The Treasury derived some comfort from the fact that total borrowing for last year (2011/12) was revised down from £126bn to £119.3bn (largely due to an underspend by local government) but this trend almost certainly won't continue. Capital Economics, for instance, expects the government to miss its deficit target for this year (£119.9bn) by £30bn. For the first time since Osborne entered No. 11, borrowing is set rise in annual terms, a significant blow to his political narrative of "balancing the books".

Worse, the parlous state of the public finances means that Osborne will likely be forced to announce the abandonment of his golden debt rule when he delivers his autumn statement on 5 December. Mervyn King, who has a long-standing alliance with Osborne, told Channel 4 News last night that slow growth (or rather, no growth) meant it would be "acceptable" for Osborne to miss the target, which requires public sector debt to be falling as a share of GDP by 2015-16.

While even Osborne recognises that it would be economically reckless to impose deeper cuts in an attempt to meet the rule, its abandonment will cause him much political pain - he will, indisputably, have failed on his own terms.

George Osborne is expected to miss his deficit target for this year by £30bn. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
Show Hide image

What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.