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.

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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