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.

Photo: Getty
Show Hide image

Paul Nuttall is like his party: sad, desperate and finished

The party hope if they can survive until March 2019, they will grow strong off disillusionment with Brexit. They may not make it until then. 

It’s a measure of how far Ukip have fallen that while Theresa May faced a grilling over her social care U-Turn and Jeremy Corbyn was called to account over his past, the opening sections of Andrew Neill’s interview with Paul Nuttall was about the question of whether or not his party has a future.

The blunt truth is that Ukip faces a battering in this election. They will be blown away in the seats they have put up a candidate in and have pre-emptively retreated from numerous contests across the country.

A party whose leader in Wales once said that climate change was “ridiculous” is now the victim of climate change itself. With Britain heading out of the European Union and Theresa May in Downing Street, it’s difficult to work out what the pressing question in public life to which Ukip is the answer.

Their quest for relevance isn’t helped by Paul Nuttall, who at times tonight cast an unwittingly comic figure. Pressing his case for Ukip’s burka ban, he said earnestly: “For [CCTV] to work, you have to see people’s faces.” It was if he had intended to pick up Nigel Farage’s old dogwhistle and instead put a kazoo to his lips.

Remarks that are, written down, offensive, just carried a stench of desperation. Nuttall’s policy prescriptions – a noun, a verb, and the most rancid comment underneath a Mail article – came across as a cry for attention. Small wonder that senior figures in Ukip expect Nuttall to face a move on his position, though they also expect that he will see off any attempt to remove him from his crown.

But despite his poor performance, Ukip might not be dead yet. There was a gleam of strategy amid the froth from Nuttall in the party’s pledge to oppose any continuing payment to Brussels as part of the Brexit deal, something that May and Corbyn have yet to rule out.

If May does manage to make it back to Downing Street on 8 June, the gap between campaign rhetoric – we’ll have the best Brexit, France will pay for it – and government policy – we’ll pay a one-off bill and continuing contributions if need be – will be fertile territory for Ukip, if they can survive as a going concern politically and financially, until March 2019.

On tonight’s performance, they’ll need a better centre-forward than Paul Nuttall if they are to make it that far. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

0800 7318496