Don't celebrate just yet, George. Photo: Getty Images
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Today's borrowing figures are good news - but we're not out of the woods yet

Britain will need five more years like this if George Osborne is to have any chance of balancing the books, warns Nida Broughton.

Today’s Government borrowing figures provide an optimistic backdrop to the Chancellor’s Summer Budget on 8 July. The year has got off to a good start. In March, the OBR expected the total amount borrowed in 2015-16 to fall by around 17%. So far, borrowing in the first two months of 2015-16 is around 24% lower than the same time last year.

It is good news – and it will be a relief for the Chancellor.  The SMF’s analysis shows that George Osborne has set himself a difficult task for this Parliament.  What seems like an easy job – saving £1 in every £100 for two years, turns out to be rather more difficult when spending promises and other factors outside the Government’s direct control have to be paid for. Commitments to spend more on the NHS, international aid and schools have been made. Debt interest payments are forecast to continue to rise. With huge chunks of the Government budget protected from cuts, the SMF estimates that the true scale of the challenge could be closer to having to save £12 in every £100.

Achieving those level of cuts will be hard enough – certainly harder than in 2010. With the easiest cuts already made, Government will need to be innovative to save money whilst keeping up the quality of public services. Yet, the ability to actually push through these cuts, though important, will not be as crucial as economic growth in getting the deficit down.

A look at the OBR’s March 2015 forecast shows that rising tax revenues is supposed to do the majority of the hard work in clearing the deficit. Tax revenues are expected to rise by roughly £20 billion- £30 billion every year over the next few years, allowing borrowing – expected by the OBR to be around £75 billion in 2015-16 - to dwindle to zero by 2018-19.

The Chancellor needs four years of steady economic growth to drive up tax revenues. The question is whether the UK economy can deliver that. We do not yet know whether the poor productivity growth we have seen since the crisis is evidence of a “new normal”; or whether we can in fact return to the levels of growth seen pre-crisis. How ephemeral was the growth we saw before the crash, and how much permanent damage has the economy taken because of the crisis?

The public finance forecast hinges on this. The OBR’s forecasts assume that the answer lies somewhere in the middle: that the economy’s potential to grow has taken a hit, but that it will slowly return to its historical average.  The SMF’s analysis shows that if this does not happen, then borrowing would fail to be eliminated by 2018-19, even if all the cuts currently planned are fully implemented.

The borrowing figures provide some good news. Government revenues – mainly from taxes – are 4% higher than this time last year. It’s a good start, but we’re going to need another few more years of same if the public finances are to be repaired.

Nida Broughton is Senior Economist at the Social Market Foundation.

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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke (all of which he denies), but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reported in the Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.