George Osborne faces ‘serious embarrassment’ ahead of the next election as Government borrowing will be too high, a Greater Manchester business chief claims.
John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, made the comments after it was revealed that government borrowing is on the rise.
Total borrowing for the first six months of this year was £46.2billion compared to £42.3 billion in 2013, and in September borrowing was £11.8billion – a £1.5billion increase on last year.
Mr Ashcroft said: “The real problem for the Chancellor is revenue. Central government receipts were down compared to last year, despite a strong rise in VAT (up 3.9%) and stamp duty (up 25%). Corporation tax revenues were healthy, up by over 5% but income tax revenues increased by just 0.1%.
“This is a real problem in an economy growing at over 3% expanding jobs in the process. The low growth in earnings is largely to blame perhaps but the paradox is at odds with basic economics.
“Compounding the embarrassment for the Treasury is the fall in interest and dividend receipts from the ‘money for nothing, gilts for free’ programme otherwise dubbed ‘QE’. Interest and dividends fell by £7.3billion to just £9.1billion.”
Although the UK economy grew by 3% in the first half of the year, the squeeze on local government has continued, with departmental spending increasing by a modest 1.6%.
Public sector net debt was £1.45billion in September, 7.5% higher than in 2013, which amounts to approximately 80% of GDP.
Mr Ashcroft added: “The government is set to miss the OBR target for the current year, with borrowing overshooting the £100billion mark in the year unless some dexterous accounting takes place.
“A serious embarrassment in the immediate run up to the election in either case.”
Image courtesy of The Conservatives, via YouTube, with thanks
