This morning’s FT lays out just how bad a state the public finances are in:
“Annual public borrowing is set to rocket towards £120bn over the next two years – far higher than City forecasts – forcing Alistair Darling to announce plans for deferred tax rises and public spending curbs when he presents his pre-Budget report next week. … The consensus forecast is for borrowing to hit 6 per cent of national income, or £90bn, next financial year, but the Treasury expects the rate of deterioration to continue apace, suggesting the budget deficit will hit 8-9 per cent of gross domestic product over the next two years, close to £120bn – three times the European Union’s deficit limit.
Such high levels of borrowing, unseen even in the 1970s, will automatically push public sector debt as a share of national income well on its way to 60 per cent, a figure that dwarfs the current limit of 40 per cent.”
Now, the political consequence of this—as the FT notes—is that Darling might have to announce deferred tax rises in the PBR. If he does, then the Tory charge that what is being announced is a tax con not a tax cut will be greatly strengthened.
Comments