George Osborne will be breathing a sigh of relief this morning. The boast he made in his Autumn Statement in December — ‘the deficit is coming down this year, and every year of this Parliament’ — appears to have held up. But only just.
The figures from the ONS today show that the government borrowed £120.9 billion in 2011-12 and £86.2 billion in 2012-13. But that 2012-13 figure is artificially lowered by £28 billion by the Royal Mail pension transfer, and by a further £6.4 billion by the cash transferred to the Treasury from the Bank of England’s Asset Purchase Facility. Strip out those two effects and borrowing in 2012-13 was £120.6 billion — still lower than 2011-12, but only by £300 million, or 0.3 per cent.
And even that figure benefits from another one-off effect: the £2.34 billion raised in the 4G auction in February. Without those proceeds, today’s figures would’ve shown the deficit rising.
But it is important to remember that this is just an estimate, and is subject to revisions. From 2007 to 2012, on average, monthly borrowing figures have been revised by £1.3 billion within a year. It’s therefore worth bearing in mind the words of caution from the Institute for Fiscal Studies on Friday:
‘We will not know for some time whether the deficit in 2012–13 was actually higher or lower than the deficit in 2011–12.’
‘It is important to bear in mind that there are no direct economic consequences either way. In economic terms it is irrelevant whether the deficit is slightly higher or slightly lower in 2012–13 than in 2011–12. Either way the bigger picture is the same.’
The importance of today’s figure, then, is not economic, but political.