£4.3bn in the red, that is the gruesome fact of the government’s January accounts. Never before has the government borrowed money in January, usually a month of surplus as self-assessed income and corporation tax receipts line government coffers. Analysts forecast a surplus of £2.8bn, denoting just how bad the situation is. This is an exact copy of last July’s accounts, lending weight to the analysis that Britain’s recovery is slow and very precarious, an analysis confirmed by the weakest mortgage lending figures for ten years.
Obviously tax revenues have collapsed. Mass redundancy, pay cuts and two years of heavy losses across the economy have decimated real incomes, making creeping inflation hugely worrying, despite the Bank of England’s jaunty outlook. The collapse of Sterling against the euro and the dollar means that the value of government bonds has fallen. The smog of gloomy facts suggests that deficit forecasts will probably have to be revised, upwards of course. Convincing the markets that Britain can get its house in order has just got much harder.