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.

Paul McMillan
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"We're an easy target": how a Tory manifesto pledge will tear families apart

Under current rules, bringing your foreign spouse to the UK is a luxury reserved for those earning £18,600 a year or more. The Tories want to make it even more exclusive. 

Carolyn Matthew met her partner, George, in South Africa sixteen years ago. She settled down with him, had kids, and lived like a normal family until last year, when they made the fateful decision to move to her hometown in Scotland. Matthew, 55, had elderly parents, and after 30 years away from home she wanted to be close to them. 

But Carolyn nor George - despite consulting a South African immigration lawyer – did not anticipate one huge stumbling block. That is the rule, introduced in 2012, that a British citizen must earn £18,600 a year before a foreign spouse may join them in the UK. 

“It is very dispiriting,” Carolyn said to me on the telephone from Bo’ness, a small town on the Firth of Forth, near Falkirk. “In two weeks, George has got to go back to South Africa.” Carolyn, who worked in corporate complaints, has struggled to find the same kind of work in her hometown. Jobs at the biggest local employer tend to be minimum wage. George, on the other hand, is an engineer – yet cannot work because of his holiday visa. 

To its critics, the minimum income threshold seems nonsensical. It splits up families – including children from parents – and discriminates against those likely to earn lower wages, such as women, ethnic minorities and anyone living outside London and the South East. The Migration Observatory has calculated that roughly half Britain’s working population would not meet the requirement. 

Yet the Conservative party not only wishes to maintain the policy, but hike the threshold. The manifesto stated:  “We will increase the earnings thresholds for people wishing to sponsor migrants for family visas.” 

Initially, the threshold was justified as a means of preventing foreign spouses from relying on the state. But tellingly, the Tory manifesto pledge comes under the heading of “Controlling Immigration”. 

Carolyn points out that because George cannot work while he is visiting her, she must support the two of them for months at a time without turning to state aid. “I don’t claim benefits,” she told me. “That is the last thing I want to do.” If both of them could work “life would be easy”. She believes that if the minimum income threshold is raised any further "it is going to make it a nightmare for everyone".

Stuart McDonald, the SNP MP for Cumbernauld, Kilsyth and Kirkintilloch East, co-sponsored a Westminster Hall debate on the subject earlier this year. While the Tory manifesto pledge is vague, McDonald warns that one option is the highest income threshold suggested in 2012 - £25,700, or more than the median yearly wage in the East Midlands. 

He described the current scheme as “just about the most draconian family visa rules in the world”, and believes a hike could affect more than half of British citizens. 

"Theresa May is forcing people to choose between their families and their homes in the UK - a choice which most people will think utterly unfair and unacceptable,” he said.  

For those a pay rise away from the current threshold, a hike will be demoralising. For Paul McMillan, 25, it is a sign that it’s time to emigrate.

McMillan, a graduate, met his American girlfriend Megan while travelling in 2012 (the couple are pictured above). He could find a job that will allow him to meet the minimum income threshold – if he were not now studying for a medical degree.  Like Matthew, McMillan’s partner has no intention of claiming benefits – in fact, he expects her visa would specifically ban her from doing so. 

Fed up with the hostile attitude to immigrants, and confident of his options elsewhere, McMillan is already planning a career abroad. “I am going to take off in four years,” he told me. 

As for why the Tories want to raise the minimum income threshold, he thinks it’s obvious – to force down immigration numbers. “None of this is about the amount of money we need to earn,” he said. “We’re an easy target for the government.”

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. 

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