A central plank of the Liberal Democrat-Conservative coalition government which ruled between 2010 and earlier this year was a promise to rein-in public expenditure such that the country was running a budget surplus rather than piling further debt on the shoulders of children not yet born to deal with when it is their hour in the sun to run the country. It didn’t happen.
The incoming Conservative majority government insists that it wants to stay the course and right the UK’s current account deficit (best not to say much about the debt mountain). Naturally, targets have been put in place to ensure that the necessary savings are made. However, it is the nature of targets that they are frequently missed.
Figures from the Office of National Statistics (ONS) show that borrowing for the month of August came in at £12.1 billion (excluding lending to banks) which was an increase of £1.4 billion higher than twelve months earlier. Analysts had forecast that borrowing would fall to £9 billion last month, so the figures represent a significant over-spend.
ONS suggests that the higher than anticipated borrowing was due to a decline in tax revenues for the month – partly because dues for July were paid promptly, rather than in arrears in August. Also, receipts for corporation tax in August were weaker than anticipated. ONS highlighted the fact that monthly figures are “volatile” with a more accurate picture being seen over several months (or a longer period). To illustrate the point, ONS noted that borrowing for the first five months of the financial year (since April) came in at £34.8 billion which shows a saving of £4.4 billion over the same period in 2014.
The UK’s Office for Budget Responsibility forecast that borrowing this financial year would come in at £69.2 billion, compared to a figure of £89.2 billion for the previous year. The plan (hope?) is to reduce this figure to zero within the lifetime of this parliament (2020).
The unmentionable debt mountain stands at £1.51 trillion and grew by a further £68.9 billion in the last financial year. It costs in the region of £50 billion per annum to service the debt, but political intent is focussed on ensuring that the principal ceases to grow rather than the debt gets paid down in any meaningful way.