Official figures have been released that reveal that last month was the worst October for public finance in the last six years- news that will undermine some of George Osborne’s economic credibility.
The gap between government spending and earnings grew by around 16% in the year to October. This gap, or “the deficit”, is now sitting at around the £8.2bn according to the Office for National Statistics. A recent Reuters poll showed that the majority of economists expected the deficit for this year to be closer to the £6bn mark.
George Osborne has declared the aim of removing the deficit by 2020; his spending review on 25 November is expected to set out the intricacies of some of these plans. It is thought that he has set the target of decreasing government spending by £20bn in the next four years.
Market experts are now saying that they believe that George Osborne will miss his deficit reduction target for this year. Many predict that he will increase his austerity measures in the upcoming spending review. The review will be delivered alongside a budget update and is often referred to as the autumn statement.
The chief UK economist at the consultancy Pantheon Macroeconomics, Samuel Tombs, commented saying:
“October ‘s poor borrowing numbers extinguish any lingering hope that the chancellor will be able to soften his austerity plans materially in next week ‘s autumn statement.”
Tombs went on to say that if Osborne wants to meet the target set by the Office for Budget Responsibility, the level of borrowing would have to be around 48% lower; Tombs believes this figure to be “implausible”. The Office for Budget Responsibility predicted a total of £69.5bn in deficit over the course of this year but the figures, which were released by the ONS, reveal yearly government borrowing to already be at £54.3bn.
The Office for Budget Responsibility releases new forecast alongside the autumn statement and many people are now predicting it to raise its forecast for the current financial year.
The ONS said that the main driving force in the lower level of deficit seen in the earlier parts of this year were lower levels of central government net borrowing. However, the Office for National Statistics believe that this was largely offset by an increase in local government net borrowing. The deficit, between April and October this year, was around £6.6bn lower than the year before- representing a fall of around 10.9%.
A spokeswoman for the Treasury said that rises in wages and employment show that the government’s economic plan “is working”.
She went on to say:
“But as today ‘s public sector finance figures show the job is not yet done and government borrowing remains too high,”
“We ‘ve learned there ‘s no shortcut to fixing the public finances to provide economic security for working people ñ that ‘s why in the spending review next week we ‘ll continue the hard work of identifying savings and making reforms necessary to build a resilient economy.”