Today’s borrowing figures show that the government has borrowed £2.6 billion more so far this fiscal year than it did in the same six months last year*, allowing Labour to continue to claim that the deficit is rising. This is, of course, embarrassing to a Chancellor who defines himself by deficit reduction — but, all things considered, it’s probably better news than Team Osborne were expecting. Last month’s figures showed that borrowing in April to August 2012 was £10.6 billion higher than in the same period of 2011*, so this month’s release is in fact a marked improvement.
It shows that September borrowing was £0.7 billion lower this year than last, and the ONS has also revised down its estimate of borrowing in April to August by £6.7 billion. That’s both good news and another important reminder that the initial monthly figures are subject to a good deal of uncertainty — they’re revised by an average of £1.7 billion within a year, usually downwards.
Indeed, the ONS’s revised estimate for last fiscal year’s deficit no longer quite supports Osborne’s claim to have cut the deficit by 25 per cent — £121.6 billion is just 23.6 per cent down on 2009-10’s £159.0 billion. (The Treasury, though, are keen to point out that as a percentage of GDP, the deficit has fallen from 11.2 to 8.0 — a 29 per cent fall. They say that it is this on which Osborne bases his ‘deficit cut by 25 per cent’ claim.)
So back to Labour’s central claim: will the deficit really be higher this year than it was last year? It seems so. Borrowing in the first half of the year* is up 4.2 per cent on the first half of last year, and if that trend were to continue for the rest of the year the 2012-13 deficit would be around £127 billion, compared to 2011-12’s £122 billion — a rise of £5 billion.
But with figures subject to revision, it’s worth remembering that this is well within the margin of error. The 2011-12 borrowing could yet be revised up further (admittedly not exactly a good way to avoid this year’s deficit being higher) and borrowing this year could well be revised down. But, the average of independent forecasts for borrowing this year is £104.7 billion, which would be £132.7 billion once the Royal Mail pension effect is accounted for — £11.1 billion (or 9.2 per cent) higher than the ONS’s current estimate for 2011-12.
And still, the debt burden continues to rise. In September, it reached £1.065 trillion or 67.9 per cent of GDP.
*Once you account for the distorting effect of the Royal Mail pension transfer, which artificially lowers this year’s deficit by £28 billion.