by Alex Porter, Economy Editor
Britain’s public borrowing exceeded all forecasts in November hitting a record £23.3bn the Office for National Statistics (ONS) said on Tuesday.
The figure, which excludes financial interventions by the UK Government, is a significant increase on last November’s borrowing requirement of £17.4bn casting doubt on claims that the UK economy is experiencing a recovery. Indeed, the figure soared past the previous borrowing record for a single month of £21.1bn recorded in December 2009.
In Scotland by contrast there is a surplus in the national accounts according to the official government figures (GERS). This surplus will go to the London treasury as Scotland faces £1.3 billion in austerity cuts next year.
This most recent indication of the divergence between the Scottish and UK economies comes after calls by world-renowned economists such as Andrew Hughes-Hallett and business leaders for the Scottish parliament to assume significantly more economic powers in order to help create a climate of certainty for Scotland’s businesses. The SNP have argued that economic independence is necessary in order to protect jobs and public services. The nationalist’s policy would also enable funding for academic institutions such as universities as they would not be affected by decisions taken by the UK coalition government.
These swelling UK borrowing requirements are further evidence that the previous Labour governments’ strategy of ‘stimulus’ was mistaken. The claim then was that stimulus would create more jobs and stabilise the British economy. This policy clearly hasn’t achieved that objective and so the public would be correct in wondering why Brown’s government borrowed so much money, on their behalf, to finance it.
YouGov economic trackers show that one year on from Gordon Brown’s ‘stimulus’ measures almost 70 percent of the population rate the UK economy as ‘bad’ with a large majority afraid of losing their jobs or not finding work over the next two to three years and 43 percent fearing losing their house over the same period.
The larger-than-expected November borrowing figure will be seen by Chancellor George Osborne as demonstrating the need for deep austerity cuts; already planned is an £81bn cuts package and a hike in VAT next month.
However YouGov’s trackers reveal that the UK Population feels austerity, like Gordon Brown’s stimulus policy, may deepen Britain’s economic crisis with more Britons, 43 percent, believing that the cuts will make the economy worse and 40 per cent better.
Net UK government debt now stands at £863.1bn, the equivalent of almost 30 times the Scottish government block grant, and represents almost 60 per cent of the UK’s gross domestic product (GDP) – another monthly record. However this figure does not include newly created money (quantative easing) or off-balance sheet debts which combined are in the region of trillions of pounds. PricewaterhouseCoopers has forcast that the UK’s debt will be £10.2 trillion by 2015.
Although government spokesmen and City analysts point to the fact that the UK government debts are less, relatively, than the amounts faced by Ireland, Greece or Japan, the UK’s debts in total are 466% of annual economic output once consumer debt is included. That’s second only to Japan. However Japan has the comfort of a sound manufacturing and export base as well as the fact that the majority of its debt, unlike the UK, is owned by its own citizens.
The parlous state of the UK economy is causing consternation among many international investors such as the world-famous investment guru and former Quantum Fund partner of George Soros, Jim Rogers who, in an interview on US business TV channel CNBC, talking about European debt problems said: “Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been cooking the books for a long time, Italy has been cooking the books for a long time and the UK is totally insolvent.”
In the run up to the Holyrood elections in May the UK’s sovereign debt, economic and currency crises will be key issues in the economic debate. The SNP will argue for economic independence to shelter Scotland from the UK’s economic instability. Iain Gray has the unenviable task of promoting the Calman proposals which have been described by experts as “dangerously flawed” and “unworkable”.
With Gray’s party being blamed by the electorate for creating the mess in Britain’s public finances, Alex Salmond will be hopeful that recent polls showing support for economic independence for the Scottish parliament will be converted into votes for the SNP.