The "cuts" again!

Cuts? What cuts?

 

In June 2010 The Office for Budget Responsibility set out its target borrowings for the Coalition government. Under that plan, in 2012-13 borrowing was supposed to be £89 billion. Borrowing in 2011-12 was £121.4 billion and the latest figures (if they can be relied on) indicate that 2012-13 borrowings will be £130 billion.

 

Of course, the Government’s figures are not necessarily that accurate – they originally said quarter 2 GDP growth was –0.7% but in the end it was nearly 50% wrong and it turned out to be –0.4%. In August, official statisticians told us that July was a budget deficit. Now they are telling us they didn’t spend more than they received, in fact July was a surplus month with receipts bigger than spending!

 

However, assuming that borrowing this year is £130 billion then it is nowhere near the original target. So what is the problem?

 

Official figures last month clearly point to where the problem is. Despite the so-called cuts, welfare spending was 7.7% up on a year ago and nearly 15% over three years. With unemployment just under 2.5 million, it almost at the same level as three years ago, it is not the “recession” that is causing the increasing spending.

 

It is a combination of Gordon Brown’s lavish tax credit system and the fact that benefits are now index-linked.

 

Despite the howls of protests about “the cuts” the reality is that the Coalition government have failed miserably in getting the burgeoning welfare budget under control.