Osborne borrows his way out of a debt crisis

This morning’s borrowing figures from the Office for National Statistics are a blow for George Osborne, showing public sector borrowing up £2.7bn on the same time last year. The stats show the government borrowed £17.9bn in May, while the 2011-12 deficit is now £127.6bn, up £3.2bn. Labour have seized on the figures, saying it’s the ‘nail in the coffin of David Cameron and George Osborne’s failed economic plan’. It’s worth remembering, though, that Labour would be borrowing even more in this Parliament than the Coalition is, with the Institute for Fiscal Studies estimating that under Labour, borrowing would be closer to £76bn in 2016-17 than the £26bn forecast in the March Budget.

Sniping about who would be borrowing more aside, that increased figure for the deficit is hardly going to overjoy Conservative MPs, who are growing increasingly concerned about the pace of deficit reduction and a dearth of supply-side reform to get the economy moving. Douglas Carswell is already on the case, arguing that the Treasury ‘still adheres to the same basic Brownian assumptions about the ability of government to engineer growth through fiscal and monetary stimulus’. He attacks ministers’ continuing reliance on low interest rates and quantitative easing, and calls for radical tax cuts instead. Fraser pointed this out just over a month ago when he wrote that the Treasury continues in ‘the old way of thinking about growth’, assuming that ‘everyone will just carry on as before, but pay more tax’. 

Either way, it’s becoming increasingly difficult for George Osborne to stand up at treasury questions (which he faces this afternoon), and say that this Government is dealing with the deficit and with debt. It will be still more difficult for him to stick to his favourite adage of ‘you can’t borrow your way out of a debt crisis’. And if we continue to see figures like this coming out of the ONS, Osborne will be facing more than just an awkward time at departmental questions in the Commons.