Osborne’s credibility ‘in tatters’ as calls for change in strategy increase


By Martin Kelly
UK Chancellor George Osborne’s economic credibility is “in tatters” according to the SNP’s Treasury Spokesperson Stewart Hosie.
Mr Hosie was responding to the latest figures from the Office of National Statistics which showed a surprise increase in borrowing for the month of July.

The new figures reveal that the UK had to borrow £600 million last month which was in contrast to a surplus of £2.8bn one year ago.

The shortfall came despite July being a historically good month for tax receipts.  Analysts have now revised their original forecasts which suggested UK borrowing would fall in 2012, and are now predicting a rise in borrowing of £30bn compared with last year.

Commenting on the publication of today’s borrowing figures, Mr Hosie claimed they were a reminder that Scotland is in a much stronger financial position than the rest of the UK.

Mr Hosie said:

“Each passing day sees George Osborne’s failed Tory economic policies push the UK economy further into decline.  No wonder even his closest supporters are now abandoning him.

“It is clear to everyone except Mr Osborne that his austerity agenda has failed, but the Chancellor continues to bury his head in the sand and ignore the chorus of calls for capital investment to boost growth.

“Having displayed so little grasp of the current economic situation, why on earth would any of us take seriously his unfounded scare stories about the prospects of an independent Scotland?”

Last week, half of the economic experts who had previously publicly backed Mr Osborne’s austerity measures urged him to change course and use capital investment to boost growth, something the Scottish government has repeatedly called for.

Mr Hosie added:

“There is no denying the facts – over the five years to 2010/11, Scotland was in a stronger financial position relative to the UK as a whole by a total of £8.6 billion – that’s over £1,600 for every man, woman and child in Scotland.

“And last year Scotland paid 9.6% of UK taxes but received only 9.3% of expenditure.

“There is absolutely no doubt that an independent Scotland – backed by control of our own vast resources which most countries can only dream of – would be considerably better off.”

Labour’s Shadow Chief Secretary Rachel Reeves said: “George Osborne’s decision to raise taxes and cut spending too far and too fast has choked off the recovery and as a result the government’s pledge to balance the books by 2015 is now in tatters,”

She added: “Unless the chancellor takes urgent action now he will end up not only borrowing billions more to pay for economic failure but he risks causing long-term damage to our economy too.”

The Office for Budget Responsibility, the official fiscal watchdog, has forecast a £5.1bn improvement in borrowing this year.  However in a statement today the OBR warned of “significant uncertainty” and added: “While it looks likely that corporation tax receipts will fall short of our March forecast, the other main receipts streams remain closer to forecast.  Clearly much will depend on the performance of the real economy and inflation over the remainder of the fiscal year.  It is too early to judge whether full-year central government expenditure will overshoot the forecast.”

Vicky Redwood, an economist at Capital Economics, said: “At this rate, borrowing for 2012-13 overall will massively overshoot the OBR’s forecast of £120bn by over £35bn.  And with the recovery falling well short of the OBR’s expectations, we think that the government will struggle to cut borrowing at all next year either.”

Resisting calls for a change in strategy, A Treasury spokesman said: “The government remains committed to the credible plan we have set out to deal with Britain’s debts, and today’s numbers emphasise how risky it would be to deliberately increase borrowing.”

The Treasury attributed £1bn of the loss in tax recepits to a lower revenues from oil and gas sector.  The Elgin gasfield in the North Sea was shut down this year after a leak.