Revealed: why the deficit actually rose today

Strip out all special factors and total borrowing was £400m higher in 2012-13 than in the previous year.

The boast that the deficit "is falling" and "will continue to fall each and every year" has been crucial to George Osborne's political strategy, so what do the final set of figures for 2012-13 show? At first sight, it appears as if the Chancellor's luck has held. Excluding the transfer of the Royal Mail pension plan and the cash from the Bank of England's Asset Purchase Facility, public sector net borrowing was £120.6bn last year, £300m lower than in 2011-12. It's worth noting that this includes the one-off windfall of £2.4bn from the 4G auction (without which the deficit would be £2.1bn higher) and that borrowing was originally forecast to be £89bn, but Osborne's boast still holds.

Or does it? Strip out all special factors (including the reclassification of Northern Rock Asset Management and Bradford & Bingley as central government bodies) and total borrowing actually rose in 2012-13. As p. 7 of the ONS release states, "on this measure Public Sector Borrowing (PSNB ex) for the year to date is £0.4billion higher than for the same period last year." These figures are of almost no economic significance. Whether borrowing marginally rose or marginally fell makes little difference to the parlous state of the British economy. But they are of immense political significance, which is why Osborne went to such extraordinary lengths to ensure the headline figures would show a fall. As I noted following the Budget, the Treasury forced government departments to underspend by a remarkable £10.9bn in the final months of this year and delayed payments to some international institutions such as the UN and the World Bank. Noting that the £10.9bn was around double the average underspend of the previous five years, IFS head Paul Johnson said:

There is every indication that the numbers have been carefully managed with a close eye on the headline borrowing figures for this year. It is unlikely that this has led either to an economically optimal allocation of spending across years or to a good use of time by officials and ministers.

That Osborne is forced to resort to ever more creative accounting is evidence of how badly off track his deficit reduction plan is. The government is currently forecast to borrow £245bn more than expected in 2010, a figure that means, as Labour's Chris Leslie noted today, that it will take "400 years to balance the books". To all of this, of course, Osborne's reply is "but you would borrow even more!" Finding a succinct response to that claim remains one of the greatest challenges facing Ed Balls and Ed Miliband. 

George Osborne leaves number 11 Downing Street in central London on March 19, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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