National borrowing going up. So what’s the plan Mr Osborne?

By Chris Rogers October 22, 2014 4:15 pm

George Osborne won’t have enjoyed reading the national credit card statement this month. Despite one of the fastest growing economies in the world, the Government borrowed £11.8 billion in September. According to the Office of National Statistics, that’s £1.6 billion more than September 2013.

In the short-term at least, the national deficit has grown rather than shrunk. So what does that mean for Mr Osborne and government policy?

For starters, it means no early end to austerity. Mr Osborne is now unlikely to achieve his targets for government borrowing for the year. It means he has less room manoeuvre in the Autumn Statement and less opportunity to offer giveaways in the Conservative election manifesto next year. If you were expecting a tax cut before or after the General Election (if the Tories are in power), you will likely be disappointed.

Not only will the Chancellor struggle to offer you a tax cut, whoever’s in power after May will also need to keep a vice-like grip on public spending, potentially for even longer than had been anticipated. And this is bad news for government departments whose budgets are not ring-fenced.

Nor is it good news for the departments with ring-fenced budgets. The chairman of Monitor, the NHS financial regulator, claimed earlier this week that the NHS needed annual and sizeable increases in budget to stay afloat and cope with the demands on its resources. But when government borrowing continues to rise, where will the money come from?

This is the problem facing Mr Osborne (and his successor if the Tories are defeated in May). And it’s not only an economic problem but a communications problem as well. The Conservatives need a credible economic message if they are to succeed in the General Election. But that economic message is a tough one to sell if you’re not seeing the benefits of economic growth, and instead continue to see stagnant wages, rising living costs, public services operating on fine margins and not a tax cut in sight.

Mr Osborne and his fellow Tory election strategists have a tough job ahead of them that just got a bit harder. They managed to sell austerity in 2010. Selling it in 2015 will be a tougher prospect.

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