George Osborne’s pledge to cut Britain’s debt share this year is in jeopardy after official figures showed the economy is smaller than previously thought.
Weaker total spending has blown a £17bn hole in the public finances, putting the Chancellor’s plans to reduce public debt as a proportion of GDP in doubt, according to new analysis.
Official figures published last week suggest the nominal, or cash size of the economy is on track to be between 1.5pc and 2pc smaller this year than the Office for Budget Responsibility (OBR), the Government’s fiscal watchdog, forecast just three months ago.
However, Britain’s £1.5 trillion debt pile has continued to rise.
Jamie Murray, chief European economist at Bloomberg Intelligence, said this suggested Mr Osborne’s “pledge to cut the national debt relative to the size of the economy will probably be missed”.
The OBR forecast in November that public sector net debt, excluding public sector banks, would fall to 82.5pc of GDP this fiscal year, from 83.1pc in 2014-15.
But the former OBR economist said weaker nominal growth, driven in part by lower inflation, and an expected £5bn borrowing overshoot this year would “leave the government £17bn away from achieving its target for the debt ratio to fall this year”.
This would push up the debt ratio by 0.9 percentage points to just over 84pc of GDP this year.
However, Mr Murray said a missed target only served to highlight how pointless the fiscal rules were.
"A rule to have debt fall relative to GDP each year creates the temptation to have civil servants mess around with spending at the last minute -- that's as good a reason as any to scrap it," he said. "In any case, a small rise in the debt ratio compared with a small decline is not something that investors will pay much attention to and the UK would not be penalised for it by markets."
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Source: Budget woes mount as Osborne struggles to control debt mountain
So £17 bln more borrowed than planned, let's do more of this TAX TAX TAX thingy to squeeze a few more billions!
Weaker total spending has blown a £17bn hole in the public finances, putting the Chancellor’s plans to reduce public debt as a proportion of GDP in doubt, according to new analysis.
Official figures published last week suggest the nominal, or cash size of the economy is on track to be between 1.5pc and 2pc smaller this year than the Office for Budget Responsibility (OBR), the Government’s fiscal watchdog, forecast just three months ago.
However, Britain’s £1.5 trillion debt pile has continued to rise.
Jamie Murray, chief European economist at Bloomberg Intelligence, said this suggested Mr Osborne’s “pledge to cut the national debt relative to the size of the economy will probably be missed”.
The OBR forecast in November that public sector net debt, excluding public sector banks, would fall to 82.5pc of GDP this fiscal year, from 83.1pc in 2014-15.
But the former OBR economist said weaker nominal growth, driven in part by lower inflation, and an expected £5bn borrowing overshoot this year would “leave the government £17bn away from achieving its target for the debt ratio to fall this year”.
This would push up the debt ratio by 0.9 percentage points to just over 84pc of GDP this year.
However, Mr Murray said a missed target only served to highlight how pointless the fiscal rules were.
"A rule to have debt fall relative to GDP each year creates the temptation to have civil servants mess around with spending at the last minute -- that's as good a reason as any to scrap it," he said. "In any case, a small rise in the debt ratio compared with a small decline is not something that investors will pay much attention to and the UK would not be penalised for it by markets."
"
Source: Budget woes mount as Osborne struggles to control debt mountain
So £17 bln more borrowed than planned, let's do more of this TAX TAX TAX thingy to squeeze a few more billions!
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