George Osborne has declared victory over Ed Balls, the IMF and all the others who warned that his austerity measures would throw Britain back into recession. But his triumphalism obscures a huge failure: his inability to contain the national debt. While the UK economy has been growing strongly (it is currently the fastest-growing of any developed country) the public finances have taken a dramatic and sudden turn for the worse. It emerged this week that, between April and September, the Chancellor borrowed £58 billion — £5.4 billion more than during the same period last year.
Osborne’s original plan to eliminate the structural deficit by the election has been off course for a long time, but it is now going backwards. This is embarrassing for a Chancellor who is about to fight the next election on financial competence. Yes, the number of jobs is soaring, but only because salaries are so miserable. The nature of the jobs created — chiefly, those at the bottom of the pay scale — explains why tax revenue is not being generated as fast as he expected. Even now, the economic recovery he once forecast is almost two years behind his original plan.
Osborne has now given himself eight years to cut state spending — by just 3.9 per cent. This is not the work of an Iron Chancellor, more like a child peeling off a plaster slowly so as to minimise the pain. It is funny to think that Labour’s Denis Healey cut state spending by 3.9 per cent in just one year (1976) when the IMF told him to.
Osborne’s slow-motion austerity has a price: the national debt, which stood at £975 billion when he took office, is £1,450 billion now, and rising fast.
As the election approaches and the parties fall over themselves to offer the usual bribes, the Chancellor’s discipline is weakening further.
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