In his March budget, the chancellor projected a current structural surplus of £6bn for 2014-15. But he now concedes that the position will be £30bn worse in that year.
The Office of Budget Responsibility’s (OBR) revised outlook will move the official forecasts into line with those of others, such as the Organisation for Economic Co-operation and Development (OECD), which yesterday declared the UK economy already to be in recession. It also predicted Britain’s underlying government borrowing was set to be worse in 2013 than in the ClubMeds – Italy, Spain, Portugal, and Greece.
The Chancellor insisted he would still hit his deficit rules, but to do this he will be extending the public spending cuts well beyond the current end-date of 2014-15. If Gideon keeps on hitting his deficit rules at the current rate, the UK will be suffering austerity until around 2030.
Crucially, Osborne’s Budget statement will make a massive switch to capital spending only. Downing Street refused to comment tonight on what effect that enormous decision would have on Government services.
Today’s UK airwaves will be full of hot air and bollocks about what George Osborne’s words mean. But the reality will remain the same whatever words are spoken: Britain is falling behind in its debt management at an alarming rate.
None of this will come as a surprise to realists. The factors in play have always been these: Labour overspent after 2002, the bank bailouts cost us dearly because of our economic bias, the cutting began five years too late, we haven’t done anything to substantively restructure the economy, and vested interests (from trade unions to senior Whitehall mandarins) have done everything in their power to undermine the austerity programme.
Still to come are the economic effects of our main trading partner’s implosion, and banking collapses in the light of EU sovereign insolvency. And to top it all, I’ve got a stinking cold.
The Slog 