Alex Belardinelli, Ed Balls’ political adviser, tweeting during Prime Minister’s Questions, 26 October 2011
“Not quite @abelardinelli – Govt is borrowing £23.6bn less this year than last year. It’s Lab who want to put up borrowing by £23bn this year”
Tory Press HQ, tweeting in response
A little Twitter spat popped up during Prime Minister’s Questions today between Ed Balls’ right hand man and the Conservative Press Headquarters.
Both repeated well-worn mantras from their parties, prompting FactCheck to wonder if there was anything new to note.
Let’s take Labour’s claim first. They are right that the government is set to borrow £46bn more than they originally planned – in March the Office for Budget Responsibility (OBR) increased its forecast for net borrowing by £45.6bn for 2011-12 to 2015-16.
Why the change? The Institute for Fiscal Studies (IFS) told us: “The underlying cause of this was a downwards revision to economic growth and an upwards revision to inflation (rather than, for example, a significant fiscal giveaway in the Budget).”
The Conservatives might not like this – but they don’t deny it. Tory Press HQ did however point out to FactCheck “it is wrong to imply that this means borrowing is going up”.
The point is that the government is borrowing more than it said it would, but borrowing overall is set to go down.
The OBR forecasts a fall in borrowing, from £145.9bn in 2010-11 to £122bn in the current financial year (then to £101bn in 2012-13, £70bn in 2013-14 and £46bn in 2014-15).
So on this point Tory Press HQ is a little ahead of itself – we are only six months into the financial year so we don’t know yet if the government is borrowing £23.6bn less this year, but it certainly plans to.
And the IFS told FactCheck that the government is broadly on course to reduce borrowing as the OBR expects.
That said, much could change over the next six months – for example tax receipts could continue to underperform.
What’s more, the Treasury’s round up of independent forecasts shows that the median prediction is for George Osborne to overshoot his target of £122bn by £6bn as the economy weakens.
The OBR is due to publish its revised forecast on November 29.
Meanwhile, what of the Tory claim that Ed Balls’ five point plan would increase borrowing by £23bn more this year?
Labour rejects this on the basis that the Tories’ analysis doesn’t include the impact on public finances of extra jobs and growth if the measures were put in place.
The Tories could well be right about the cost of putting the five point plan in place, but there’s no way of knowing how Labour would implement the policy because the Opposition hasn’t provided enough detail.
Mr Balls has, for example, told us that there should be a temporary cut in VAT from 20 per cent to 17.5 per cent.
This would cost roughly £1bn a month, but Labour hasn’t said how many months they’d keep it in place for.
As Carl Emmerson, deputy director of the IFS, told us: “The true cost of Labour’s stimulus package would depend on many factors, not least how long they were in place for.”
The IFS therefore can’t tell us how much Labour’s plan would cost, and equally the OBR told FactCheck it couldn’t comment as it hasn’t costed the policies either.
After lying dormant for almost six months, these well-worn party claims are due for a shake-up when the OBR publishes its revised forecast in just over a month’s time.
As it stands now, Ed Balls’ team is right that the government is borrowing more than it said it would. But the Tories are also right that the government is broadly on track to reduce borrowing by £22bn this year.
By the Conservatives’ estimates, Labour would spend £23bn more – the problem is that Labour hasn’t given us the sums to go on, so no independent body can verify that guestimate.
Either way – reining in spending is apparently working for the government, but the worry is: what effect is it having on economic growth?
In March, the OBR forecast growth of 1.7 per cent – but this comes above the highest of the independent forecasts made in the last three months, which is 1.6 per cent. And it’s also well above the median forecast of 1 per cent.
Low growth would hit tax receipts, spelling trouble for Mr Osborne.
All eyes then, will be fixed on the OBR next month.
By Emma Thelwell