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Budget deficit ban: how much have past governments borrowed? Budget deficit ban: how much have past governments borrowed?
(about 1 hour later)
George Osborne is introducing a law that bans the government from falling into deficit in “normal” economic times.George Osborne is introducing a law that bans the government from falling into deficit in “normal” economic times.
The main focus of Osborne’s time as chancellor has been cutting the amount of money the government needs to borrow. According to Office for Budgetary Responsibility (OBR) forecasts, the government will be in surplus by 2019-20, a year later than was forecast in the pre-election budget in March.The main focus of Osborne’s time as chancellor has been cutting the amount of money the government needs to borrow. According to Office for Budgetary Responsibility (OBR) forecasts, the government will be in surplus by 2019-20, a year later than was forecast in the pre-election budget in March.
Osborne has defined “normal times” as when the economy grows by at least 1% on a rolling four-quarterly basis. That is pretty normal, as the chart below shows.Osborne has defined “normal times” as when the economy grows by at least 1% on a rolling four-quarterly basis. That is pretty normal, as the chart below shows.
Surpluses are not quite as common. The UK has been in the red for the vast majority of the years since the second world war. However, the Labour government managed to move into surplus in the early 2000s. Surpluses are not quite as common. The UK has been in the red for the vast majority of the years since the second world war. However, the Labour government presided over a period of surplus in the early 2000s.
Running a budget surplus has not been a priority for most previous governments. According to the Financial Times (£), John Major was the first prime minister to target eliminating the deficit, but he was not able to do so while in power.Running a budget surplus has not been a priority for most previous governments. According to the Financial Times (£), John Major was the first prime minister to target eliminating the deficit, but he was not able to do so while in power.
A budget surplus is also a rare thing among the UK’s European partners. Last year all but five of the 28 members of the EU had a deficit. The UK’s deficit in 2014 was 5.7% of GDP, the third largest in Europe after Cyprus and Spain.A budget surplus is also a rare thing among the UK’s European partners. Last year all but five of the 28 members of the EU had a deficit. The UK’s deficit in 2014 was 5.7% of GDP, the third largest in Europe after Cyprus and Spain.
To justify his approach, Osborne made reference to crisis-ridden Greece, saying that if a country was not control of its borrowing then borrowing could take control of the country. Critics such as the Spectator’s Fraser Nelson were quick to point out that Greece is forecast to return to surplus before the UK. To justify his approach, Osborne made reference to crisis-ridden Greece, saying that if a country was not control of its borrowing then borrowing could take control of the country. Critics such as Fraser Nelson, editor of Spectator magazine, were quick to point out that Greece is forecast to return to surplus before the UK.
Osborne on Greece: "If the country is not in control of borrowing, the borrowing takes control of the country”.Erm.. pic.twitter.com/EA9eQXC8kgOsborne on Greece: "If the country is not in control of borrowing, the borrowing takes control of the country”.Erm.. pic.twitter.com/EA9eQXC8kg