Growth cut the 2010-11 deficit as fast as cuts

George Osborne’s strategy was 75% cuts and 25% taxes, but he forgot to add in growth; growth last year cut the deficit as much as cuts.

Yesterday the ONS released new revised figures (pdf) for 2010-11 borrowing, a net borrowing of £136.7 billion. Still an enormous number, but a smaller number than HMT was predicting in March 2010; then the number was £163bn.

The consensus at the time was that recovery from a balance sheet recession would be slow. But as we saw last year, left to recover, the economy can defy the consensus, and growth definitely wasn’t slow.

A year ago, even George Osborne was celebrating that GDP was growing at its fastest rate since 1999. The predictions for borrowing for 2010-11 were also frequently downgraded as each quarter of fast growth continued.

Of course that all stopped in the fourth quarter, and now the chancellor’s having a bout of amnesia about how fast growth can go.

We can now highlight the effect growth can have:


Budget deficit 2009-10

£156.1bn
Darling 2010 budget effects + £1.4bn
June 2010 emergency budget cuts – £8bn
Effect of VAT rise accrued from Jan 2010 -£2bn
Fastest growth since 1999 -£10.8
Outturn £136.7bn

Osborne’s strategy was 75% cuts and 25% taxes, but he forgot to add in growth. Growth last year cut the deficit as much as cuts.

At the moment, the OBR is predicting the deficit will be cut only to £121bn:


Budget Deficit 2010-11

£136.7bn
Darling’s budget changes (estimate from March 2010) -£3.7bn
OBR June 2010 estimates of policy changes -£16bn
Stagnation increase to deficit +£5bn
OBR current prediction of the 2010-11 deficit £122bn

It is likely that this year the stagnation since Q4 2010 will be a net drag on cutting the deficit. We believe it will be worse than the £4bn here. The OBR noted yesterday receipts still aren’t growing as fast as it likes.

At the same time unemployment rose by 80,000 – if it continues in that direction it could pose a problem. OBR’s fiscal prediction is 8.2% unemployment; it’s already at 7.9%. Both will push the borrowing higher.

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29 Responses to “Growth cut the 2010-11 deficit as fast as cuts”

  1. Political Planet

    Growth cut the 2010-11 deficit as fast as cuts: George Osborne’s strategy was 75% cuts and 25% taxes, but he for… http://t.co/h2cj1VJZ

  2. Hens4Freedom

    RT @leftfootfwd: Growth cut the 2010-11 deficit as fast as cuts: http://t.co/xSwvr1Ob writes @CormacHolly #Osborne #TheLostRecovery

  3. Max Ramsay

    Growth cut the 2010-11 deficit as fast as cuts: http://t.co/9kkFCHYP writes @CormacHolly #Osborne #TheLostRecovery

  4. Fiona Edwards

    Growth cut the 2010-11 deficit as fast as cuts: http://t.co/9kkFCHYP writes @CormacHolly #Osborne #TheLostRecovery

  5. Gill Goodswen

    Growth cut the 2010-11 deficit as fast as cuts: http://t.co/9kkFCHYP writes @CormacHolly #Osborne #TheLostRecovery

  6. Michael

    Growth cut the 2010-11 deficit as fast as cuts – http://t.co/OfCr7BLs

  7. Daniel Elton

    @lisybabe @leftfootfwd seems to be working now. Btw, an article all progs should read on econ: http://t.co/kHJ88RBW

  8. hana riaz

    Growth cut the deficit 10/11 as much as cuts http://t.co/Wp20v3zw @leftfootfwd

  9. Shamik Das

    Growth cut the 2010-11 deficit as fast as cuts: http://t.co/9kkFCHYP writes @CormacHolly #Osborne #TheLostRecovery

  10. Guy

    Growth cut the 2010-11 deficit as fast as cuts http://t.co/NeZiV0oI

  11. Steve Trow

    Growth cut the 2010-11 deficit as fast as cuts: http://t.co/9kkFCHYP writes @CormacHolly #Osborne #TheLostRecovery

  12. UNISON MillionVoices

    RT @leftfootfwd: Growth cut the 2010-11 deficit as fast as cuts: http://t.co/8Zr1G2Gs writes @CormacHolly #Osborne #TheLostRecovery

  13. Lisa Ansell

    RT @leftfootfwd: Growth cut the 2010-11 deficit as fast as cuts: http://t.co/8Zr1G2Gs writes @CormacHolly #Osborne #TheLostRecovery

  14. Richard

    For an evidence-based blog, you really are quite careless with figures. You state “At the moment, the OBR is predicting the deficit will be cut only to £121bn”, yet in the following sum, we read “OBR current prediction of the 2010-11 deficit 122bn”. You go on to state “It is likely that this year the stagnation since Q4 2010 will be a net drag on cutting the deficit. We believe it will be worse than the £4bn here.” Yet the sum above states “Stagnation increase to deficit 5bn”. If you really want the evidence to be taken seriously, accuracy should be your first priority.

  15. The crisis gets worse: For every £4 spending is cut, it only cuts borrowing 75p | Left Foot Forward

    […] Growth cut the 2010-11 deficit as fast as cuts – Cormac Hollingsworth, September 22nd […]

  16. Cormac Hollingsworth

    @TheGreenBenches … when we had growth http://t.co/AKtroNo9

  17. Cormac Hollingsworth

    Cameron claims debt is a drag on growth. The facts that: Growth cut the 2010-11 deficit as fast as cuts http://t.co/AKtroNo9 @leftfootfwd

  18. Alison McGovern

    Cameron claims debt is a drag on growth. The facts that: Growth cut the 2010-11 deficit as fast as cuts http://t.co/AKtroNo9 @leftfootfwd

  19. Catherine Atkinson

    Cameron claims debt is a drag on growth. The facts that: Growth cut the 2010-11 deficit as fast as cuts http://t.co/AKtroNo9 @leftfootfwd

  20. Edward Hortop

    Cameron claims debt is a drag on growth. The facts that: Growth cut the 2010-11 deficit as fast as cuts http://t.co/AKtroNo9 @leftfootfwd

  21. Seema Chandwani

    http://t.co/UAasmgny << This is a confusing article, but I think it says Osbourne failed his Maths GCSE & we're all screwed!!

  22. Andy Nugent

    Cameron claims debt is a drag on growth. The facts that: Growth cut the 2010-11 deficit as fast as cuts http://t.co/AKtroNo9 @leftfootfwd

  23. Kellner: The public don't like the Tories, but they've signed up to their economic argument | Left Foot Forward

    […] Growth cut the 2010-11 deficit as fast as cuts – Cormac Hollingsworth, September 22nd 2011 Share | Permalink | Leave a comment /* […]

  24. Vanessa

    MP makes the point growth will cut the deficit as much as cuts; more frm @cormacholly: http://t.co/Xo6Xy5rd

  25. Joseph Burnett

    MP makes the point growth will cut the deficit as much as cuts; more frm @cormacholly: http://t.co/Xo6Xy5rd

  26. Sue Davies

    MP makes the point growth will cut the deficit as much as cuts; more frm @cormacholly: http://t.co/Xo6Xy5rd

  27. Martin Johnston

    MP makes the point growth will cut the deficit as much as cuts; more frm @cormacholly: http://t.co/Xo6Xy5rd

  28. Panda

    MP makes the point growth will cut the deficit as much as cuts; more frm @cormacholly: http://t.co/Xo6Xy5rd

  29. Costelmarin11

    This article is very informative you are really right with this http://www.ccmp3.net

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