Borrowing is much higher than it should be. Photo: Getty
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Government borrowing: the numbers don’t add up

There is less scope in the years ahead for our current levels of borrowing to be eliminated by further economic growth. 

Friday’s public spending figures brought some small comfort to the Chancellor. In September, borrowing for the year was 10 per cent higher than the previous year; the gap has now narrowed to 6 per cent. But that is very small comfort indeed when borrowing was supposed to fall by around 12 per cent this year.

The initial signs looked good: GDP growth for 2014 is expected to come in at around 3 per cent, higher than the OBR forecast back in March. But poor wage growth has continued to hold tax receipts down. The result is that borrowing is much higher than it should be. 

At the same time, economic forecasters are putting the higher than expected growth down to a faster recovery rather than an improvement in the underlying health of the economy. This means that there is less scope in the years ahead for our current levels of borrowing to be eliminated by further economic growth. 

This has serious consequences for fiscal targets in the next parliament. The Conservatives have said that if they win the next election, they would seek to generate an overall surplus by 2018-19. 

On the plans set out back in March, that looked feasible. With £38bn of cuts to government departments after 2015-16, the OBR forecast that by 2018-19, the next government would have eliminated borrowing and would in fact be running a surplus of just over £1 billion. 

The SMF’s calculations, based on the latest economic forecasts, shows that this is no longer likely to be the case. Instead, even with the £38bn of cuts, borrowing will still be at around £14bn. To hit their targets, the Conservatives would have to bring the total cuts after 2015-16 to £52bn.

Since 2010, the deadline for completing the deficit reduction programme has had to be repeatedly postponed. In large part, thisis because the state of the economy has disappointed. In the next parliament, as with this one, the performance of the economy will make the difference between success and failure in meeting any of the main political parties’ fiscal targets. If, for example, it were possible to repeat the sustainable growth era of the early 2000s, the need for further cuts after 2015-16 would disappear. By contrast, if we see a repeat of poor underlying productivity growth seen in recent years, the size of the cuts required could balloon.

The next government must have an ambitious plan to boost long-term growth, and repairing the UK economy must be seen and treated as an integral part of any public spending strategy. This means that areas of spending that have growth enhancing-benefits must be prioritised.

The spending cuts programme was expected to be over in time for the 2015 general election. Instead, the next incoming government will have an even bigger challenge on its hands than in 2010: making further fierce cuts to spending when the easiest savings have already been made.

Nida Broughton is Chief Economist at the Social Market Foundation 

Nida Broughton is Senior Economist at the Social Market Foundation.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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