ALEX BRUMMER: Out of recession?

| October 20, 2012 | 0 Comments

Alex Brummer

04:50 EST, 20 October 2012


10:06 EST, 20 October 2012

The relief inside the Treasury over the latest data on the public finances will be palpable.

Fears that the Government would greatly overshoot its forecast borrowing of £120billion for the 2012-2013 financial year – following two quarters of recession – will be greatly diminished.

Latest figures from the Office for National Statistics show that the combination of a tighter grip on public spending together with stronger tax receipts meant that borrowing in September came in at £12.8billion – £700million less than expected.

Working: Employment is at a record high which means less money spent on jobseekers¿ allowance

Working: Employment is at a record high which means less money spent on jobseekers¿ allowance

And just as importantly, revisions to
early data show that in the first five months of the year, the out-turn
was actually £6.7billion better than previously reported.

This is not a case for hanging out the bunting because debts are still accumulating at an alarming rate.

Chancellor George Osborne should not
be diverted from his task of cutting a further £10billion from the
welfare budget when he presents his Autumn statement to the Commons on
December 5.

After all, as a nation we are still
spending £207billion a year on what the Treasury euphemistically calls
‘social protection’, by far the single biggest slug of public

The improved government balance sheet
is down to several factors. The receipts from VAT are rising strongly,
reflecting a better mood among the public, as shown by the latest retail
sales figures.

Similarly, income from National
Insurance payments is on the rise – a direct result of the improvement
in the claimant count of unemployment. 

Employers and staff pay National Insurance contributions – even if much of the new work created is part-time and low quality.

The weak spot as far as tax receipts
is concerned comes from corporation taxes. A combination of companies
sold abroad, aggressive tax avoidance by foreign investors such as
Starbucks and the gradual lowering of the headline rate of company
taxation is taking its toll.

However, the improving picture for
the public finances allows absolutely no room for complacency in
government, Whitehall or among ordinary households.

On current trends, even with the
extra cuts in December, the nation’s accumulated borrowing – known as
the national debt – will continue to rise year by year until it hits
96.6 per cent of the total output of the economy in calendar year 2015
(just before the next General Election), according to the latest
projections from the International Monetary Fund. 

It will then begin to slowly decline.

But the nation will remain deeply
indebted until the end of this decade – the grotesque legacy of the
banking crisis and Labour’s profligacy.

The comments below have not been moderated.

Not yet; but any improvement has to be good news!

David James

Everdon, United Kingdom,
20/10/2012 17:24

He can borrow as much as he wants I don’t want any of it you shouldn’t spend what you haven’t got.


20/10/2012 16:08

Last year the Goverment owed £900m, this year it is over £1000B. So Osborne answer is to borrow more money to give a few a £40,000PA tax cut…. At the same time other departments are cutting safe on just £10,000 PA front line staff. It does not seam fair?


London, United Kingdom,
20/10/2012 14:20

only the tip of the iceburg, borrowing still on the up so no deficit reduction.
would you trust any of these lieing politicians on anything, who look down their noses with contempt for the public. and from their ivory recession proof towers.
it took over 30 thirty years to pay of lend lease with the yanks for ww2,and this is worse .most people liveing will not be around if this ever gets paid off,and i say IF. the pound will be worth about 10p by then so maybe that would make paying it off easier. i dont care because i will not be there by then.


20/10/2012 13:59

Is this the end of the recession? Nope, but it could very well be the end of britians fiat monetary system now that the masses are waking up to the fact that things are not going to get better any time soon.

frankie mcgill

20/10/2012 13:48

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