Wednesday, 24 August 2011

Higher Borrowing Under Osborne?

Cormac Hollingsworth at Left Foot Forward claims that:
... the City now expects the coalition to borrow £10 billion more than the OBR prediction, blasting through Alistair Darling’s budget for 2011/12 by at least £5bn.
This claim seems odd indeed. Firstly, no source is given for the City's expectations. Secondly, this City prediction is being compared to the OBR prediction for the Darling Plan. Thirdly, the numbers don't appear to add up. Quoting from the article:

To repeat the numbers, the OBR prediction for Darling’s budget plans was for Total Managed Expenditure in 2011/12 to be £708.9bn and receipts of £581.5bn, generating a borrowing figure of £127.8bn.
The latest OBR prediction for the March Budget was TME £710.4bn and receipts of £588.6bn, a borrowing figure of £121.8bn that was already a rise from the June emergency budget of £116bn due to a downgrading of growth.
But if the OBR prediction is for £121.8bn of borrowing and the City expects £10bn more, that comes to £131.8bn. That's exactly £4bn more than under the Darling Plan, not "at least £5bn". What have I missed?

Of course, the OBR has not been continually updating its forecasts for the Darling Plan like it has for the actual plan being implemented. Their prediction for the Darling Plan assumed 2.6% growth in 2011. How much would that have to fall before borrowing under the Darling Plan became more? And would anyone argue that under Darling we'd have 2.6% growth given what's happening globally?

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