From the TUC

Government to miss borrowing targets by a quarter of a trillion pounds?

21 Nov 2012, by Guest in Economics

It is now quite widely accepted that come the Autumn Statement on December the 5th the Office for Budget Responsibility will once again be forced to revise down its growth projections and revise up its borrowing forecasts. Today the Treasury published its latest round-up of the views of independent economists. Today’s release is contains forecasts all the way out to 2016, whihc give some indication of the scale of the likely revisions.

The table below compares the most recent growth forecasts of independent economists to the most recent forecasts of the OBR – which were made back in March alongside the budget

The new OBR forecasts are likely to be in line with the consensus (they usually are). 

Those numbers make for grim reading – growth of just 1.1% in 2013 and 1.7% in 2014 would be a disaster. It would mean GDP wouldn’t reach it’s 2008 level until early 2015.

Early this year the OBR hoped that growth would accelerate to 3% by 2015, independent economists now expect growth of just 2% that year. Cumulatively the new forecasts would represent an undershoot of 4.7% of GDP by 2016. And this would be an undershoot on growth projections that were already regarded as weak.

Weaker growth has serious implications for the government’s borrowing targets, as the table below makes clear.

On the current independent consensus the government is set to borrow almost £80bn more than they intended at the time of the budget by 2016.

Given that the current OBR projections are already more than £150bn higher than at the time of the Comprehensive Spending Review of 2010, the Government now looks set to miss its initial borrowing targets by something in the order of a quarter of a trillion pounds.

Plan A has failed.

UPDATE:

The June 2010 Budget had borrowing in 2015/16 of just £20bn, £83.5bn would be a quite miss.

 

 

 

6 Responses to Government to miss borrowing targets by a quarter of a trillion pounds?

  1. George Osborne: From good Darling to bad Darling. | Hopi Sen
    Nov 21st 2012, 6:49 pm

    […] Duncan Weldon says, the consensus forecast for the UKs future borrowing indicates that the Government is going to miss […]

  2. rob andersen
    Nov 22nd 2012, 1:54 am

    just checking something. This year 2012 we’re looking like we will borrow 125bn.In Gordon browns last 12 months he borrowed 170bn. At this latter rate what would the etra borrowing be? Genuine question

  3. Duncan Weldon

    Duncan Weldon
    Nov 22nd 2012, 11:55 am

    Hi Rob,

    The data is all available here on the actual level of public borrowing: http://www.ons.gov.uk/ons/dcp171778_287745.pdf

    (Table PSF1 is what you want).

    In financial year 2009/10, the last full year of the Labour Government borrowing was £159bn. So on current projection by the end of this parliament (year 2014/15 will be the last full financial year) it will have been rediced by around one third. The Government;s original plan was to reduce it by more than three quarters by that year.

  4. Judy Dickinson
    Nov 22nd 2012, 5:01 pm

    The trouble with figures is that vast majority do not understand the difference between deficit and borrowing – what is it? They seem to be used quite indiscriminately by commentators. I need to be able to put on my Labour website a very simple argument preferably with very simple graph to show the nonsensity of the Plan A. Am I expecting too much?

  5. Frances Coppola
    Nov 24th 2012, 11:31 am

    Judy,

    – The deficit is the difference between the government’s expenditure and its income.
    – Borrowing is what it does to fill that gap.
    – The national debt is the ACCUMULATED debt over years and years of borrowing to plug deficits or to fund exceptional expenditures such as wars.

    If you want a very, very simple graph showing that severe austerity does not work, try this one from marc to market. It’s about Greece, of course, and the forecasts are from the IMF, but it makes the point beautifully:

    http://1.bp.blogspot.com/-dVv_ARFgxLU/UKUxkSbk8RI/AAAAAAAACtE/vIxUwJk7_dk/s1600/greece.png

    Surprisingly similar to the revision of the OBR estimates that Duncan highlights, don’t you think?

  6. Judy Dickinson
    Nov 24th 2012, 4:25 pm

    Many thanks – Great graph!

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