We can all overdo it a little at Christmas, but the government’s monthly overdraft statement — which came in this morning — is of a different order. In December, HM Treasury spent £15.4 billion more than it received in tax, a worse result than December last year where the monthly deficit was £14.8 billion. And why? Well, growth has been sluggish (we may learn on Friday that the UK economy is shrinking again) so tax revenues have fallen. But, more worryingly, state spending seems to be running out of control too. The below graph, from Citi, sums it up. The blue is what is expected (from those fiscal Mystic Megs at the Office for Budget Responsibility) for 2012-13 and the pink is what we have seen in the first nine months of that period.
CoffeeHousers will notice that the last four bars show spending up, not down. A funny kind of sado-austerity. While spending is up quite strongly, the tax haul is up by a pathetic 0.3 per cent, a far cry from the expected (and already-downgraded) 1.4 per cent. None of this makes it more likely that the UK government will hold on to its AAA credit rating which is still, supposedly, an explicit government promise. From now on, I suspect neither David Cameron nor George Osborne will talk about this rating as being very important.
No.10 said that Cameron ‘believes the economy is healing’ — his line, in public, is that he is ‘dealing with the debt’. Such language, of course, means only 10pc of the public realise that the debt is rising. The below graph shows what has happened since the election – the debt closed last year at £1,111 billion.