He has been desperately trying to persuade us that things could be worse, but the truth is that this week’s news is a bitter blow for George Osborne.
He has been desperately trying to persuade us that things could be worse, but the truth is that this week’s news is a bitter blow for George Osborne. Our economy only grew by 0.2 per cent this quarter, at a time when he desperately needs stronger growth to generate the tax required to finance public spending and reduce his awful budget deficit. Our chancellor may seem nonchalant but, as he knows, this pitiful growth means less money for the exchequer, and the prospect that Britain will be stuck in a permanent state of semi-stagnation. The coalition government has seemed weirdly insulated from the bleak reality. But the truth is beginning to dawn: unless the economy picks up dramatically and sustainably, the Treasury will soon have to review its long-term plans for the public finances — and that will mean even more austerity to stave off a crisis.
Don’t underestimate the potential for disaster. International insurance companies, pension funds and banks will be lending the government at least £334 million every single day this year. They wouldn’t tolerate the kind of solution advocated by Ed Balls — to borrow even more for years to come — in a context in which insolvent governments have become the new Lehman Brothers. The only other option would be for the Bank of England to start buying the government’s IOUs on a massive scale again, guaranteeing eventual disaster.
The public finances remain in a critical state. Last financial year, the coalition was forced to borrow £142.1 billion, a terrifyingly large sum of money. This year, Osborne is hoping to borrow £122 billion.
Comments
Join the debate for just £1 a month
Be part of the conversation with other Spectator readers by getting your first three months for £3.
UNLOCK ACCESS Just £1 a monthAlready a subscriber? Log in