Public sector borrowing on course to overshoot OBR projections by £11bn

ONS reports a stronger January than last year, but the trend remains poor.

The ONS has released the public sector finances for January 2013, showing that the government ran a surplus of £11.4bn in the month, £5bn higher than in January 2012.

But as Nida Ali, economic advisor to the Ernst & Young ITEM Club, comments, the good news is largely a mirage:

Today’s figures demonstrate the problems caused by all of the statistical fudges of the past couple of years – the various transfers from the Bank of England, Northern Rock and Bradford & Bingley make it virtually impossible to decipher the underlying trend.

Although January’s headline number looks encouraging, it appears that the state of the public finances is worse than the government and the OBR had hoped for. Stripping out the one-off factors, net borrowing in the financial year-to-date is £7.5bn higher than last year. With just two months of data pending and last year’s deficit having been revised down, there is virtually no chance of borrowing being lower on a like-for-like basis in 2012/13 than in 2011/12.

Furthermore, the ONS has put a ceiling of £9.1bn on the amount of cash that can be transferred from the Central Bank to the government in 2012/13. Given that this also includes the payment from the Special Liquidity Scheme, it means that the reduction in borrowing caused by the transfers from the Bank of England’s Asset Purchase Facility will be £5bn less than the OBR had forecast.

However, even accounting for this setback and the lower than expected 4G proceeds, the government was still on course to miss the OBR’s 2012/13 borrowing forecast by a distance. Assuming that borrowing in the final two months of the financial year is the same as it was last year, the government is on course to overshoot the OBR’s 2012/13 forecast of £80.5bn by almost £11bn.

An £11bn overshoot even of the OBR's already depreciated forecast will be bad news indeed for the Chancellor. But the deficit is, at least, on course to be lower than it was last year; and January itself was strong, as the chart below shows:

Cumulative public sector net borrowing by month, excluding the temporary effects of financial interventions

Good news this month, then — but it only highlights how bad the news has been for the rest of the year.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

The 5 things the Tories aren't telling you about their manifesto

Turns out the NHS is something you really have to pay for after all. 

When Theresa May launched the Conservative 2017 manifesto, she borrowed the most popular policies from across the political spectrum. Some anti-immigrant rhetoric? Some strong action on rip-off energy firms? The message is clear - you can have it all if you vote Tory.

But can you? The respected thinktank the Institute for Fiscal Studies has now been through the manifesto with a fine tooth comb, and it turns out there are some things the Tory manifesto just doesn't mention...

1. How budgeting works

They say: "a balanced budget by the middle of the next decade"

What they don't say: The Conservatives don't talk very much about new taxes or spending commitments in the manifesto. But the IFS argues that balancing the budget "would likely require more spending cuts or tax rises even beyond the end of the next parliament."

2. How this isn't the end of austerity

They say: "We will always be guided by what matters to the ordinary, working families of this nation."

What they don't say: The manifesto does not backtrack on existing planned cuts to working-age welfare benefits. According to the IFS, these cuts will "reduce the incomes of the lowest income working age households significantly – and by more than the cuts seen since 2010".

3. Why some policies don't make a difference

They say: "The Triple Lock has worked: it is now time to set pensions on an even course."

What they don't say: The argument behind scrapping the "triple lock" on pensions is that it provides an unneccessarily generous subsidy to pensioners (including superbly wealthy ones) at the expense of the taxpayer.

However, the IFS found that the Conservatives' proposed solution - a "double lock" which rises with earnings or inflation - will cost the taxpayer just as much over the coming Parliament. After all, Brexit has caused a drop in the value of sterling, which is now causing price inflation...

4. That healthcare can't be done cheap

They say: "The next Conservative government will give the NHS the resources it needs."

What they don't say: The £8bn more promised for the NHS over the next five years is a continuation of underinvestment in the NHS. The IFS says: "Conservative plans for NHS spending look very tight indeed and may well be undeliverable."

5. Cutting immigration costs us

They say: "We will therefore establish an immigration policy that allows us to reduce and control the number of people who come to Britain from the European Union, while still allowing us to attract the skilled workers our economy needs." 

What they don't say: The Office for Budget Responsibility has already calculated that lower immigration as a result of the Brexit vote could reduce tax revenues by £6bn a year in four years' time. The IFS calculates that getting net immigration down to the tens of thousands, as the Tories pledge, could double that loss.

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

0800 7318496