Courtesy of Liam Halligan @ The Telegraph:
Most pundits assume the general election will be fought against a strong economic backdrop. The Conservatives certainly hope that buoyant consumer sentiment, including continued rock-bottom interest rates and stable financial markets, will help them secure victory, and even an overall majority, in May 2015.
After David Cameron’s conference speech in Birmingham earlier this month, complete with a promised £7bn income tax cut, some 39pc of voters said it was the Tories “they most trust to manage the economy”, compared with just 19pc backing Labour.
It was in the afterglow of that speech that the Tories chalked up an overall poll lead for the first time in more than two years. A strong economy, then, will clearly be front-and-centre in any successful Conservative general election campaign.
It’s politically significant, then, that public sector borrowing figures released on Tuesday were truly shocking – so bad, that further pre-election promises of tax cuts are now much less likely. Such promises, as we just saw, are vital when it comes to keeping the Government’s electoral opponents at bay. If such terrible figures continue into the coming months, the Tories could even lose their reputation for superior economic management.
The economy is growing at 0.7pc per quarter, we learnt on Friday, far faster than last year. Yet public sector net borrowing over the first half of 2014-15 was 10pc higher than the same period in 2013-14. Borrowing in September alone was £12bn, a staggering 15pc up on the same month the year before. While tax receipts were up 3.1pc, revenue growth was outstripped by even higher spending. For all the talk of “austerity”, central government expenditure in September was 5.4pc above that during the same month a year ago, as welfare payments spiralled.
The Government, having already borrowed £58bn between April and September, is almost certain to miss its £96bn annual target by a mile. It’s now all but certain the UK will post a sixth successive year of triple-digit, billion-pound deficits, five of them under the Tories. Osborne has borrowed more in his half-decade as Chancellor than his predecessor Gordon Brown did during a decade at the Treasury. The Conservatives’ 2010 “emergency Budget” said the books would be balanced by next year. Official projections now suggest that won’t happen until 2018-19.