Today’s news from the Office for National Statistics that George Osborne is borrowing half a billion pounds more for June 2012 than in June 2011 shows that his plan of fiscal tightening, or austerity, isn’t working. As reported in the Daily Mail “the Chancellor came under fresh pressure today as figures revealed that Government borrowing surged in June to £14.4billion.” Acording to the Mail “economists had predicted that the deficit – the difference between tax receipts and spending – would be £13.9billion. But revised figures show that in June total Government spending stood at £52.4 billion with tax revenues of £40.9 billion. Spending had only dipped by one per cent and tax returns had increased by 3.6 per cent.”
The Telegraph reports comments from James Knightly, an economist at ING, who said: “It is clear that the recession is leading to a worsening of the UK’s underlying fiscal position and raises more question marks over the effectiveness of the government’s austerity measures.”
David Blanchflower, former member of the Monetary Policy Committee of the Bank of England has been a constant critic of Cameron and Osborne’s lack of economic understanding, said on Twitter today “The reality now is that Osborne politically can’t change the economics because he then has to admit Ed Balls called it right we all lose.” Speaking to Sky News, Labour’s shadow chief secretary to the Treasury, Rachel Reeves, described the figures as “another damaging blow” and accused the coalition of “choking off the recovery”. Reeve”s points out that unless the Chancellor takes urgent action to boost the economy now he will end up borrowing billions more to pay for economic failure and cause long-term damage too,” she said.
And the reason that the IMF thinks that the growth stall is significant? Jonathan Portes, writing in The Guardian points out that the “IMF estimates that for every 1% growth shortfall now, structural unemployment – the unemployment that won’t go away when the economy recovers – increases by about 40,000 people.” Portes points out that
“A non-technical summary of Thursday’s International Monetary Fund report on the UK economy would be that we are up the creek – “recovery has stalled” – and that we should use any available paddle to head as fast as possible in the opposite direction. “Demand support is needed. Additional monetary stimulus … credit easing measures … increased government spending on public investment.” Stop pretending we’re on track, and throw the kitchen sink at the economy.”
It’s clear that Osborne’s plan is failing day by day, and that it is communities up and down the country who are going to be paying the long-term price for a blinkered and discredited Chancellor who confuses ideology with pragmatic, practical reality.