The April figures for public borrowing were a new high for April. The government borrowed an extra £10 billion. They explained that this was more than April 2010 because in that month the government received the one off £3.5 billion tax on the banks. This has been replaced by a regular tax which does not come in in one lump.
What the detailed numbers show is that the main reason for the extra borrowing in April was extra spending. Public spending rose by £2.6 billion or 5% compared to the same month a year ago. Revenues were £42.9 billion in April 2011, compared to £43.2 billion in April 2010. In other words £3.2 billion of the £3.5 billion one off bank tax was replaced by other tax increases imposed since. Extra public spending is a far bigger cause of higher borrowing than revenue decline in these figures.
There was some good news . 2010-11 borrowing came in a little lower than forecast. The net cash requirement, which had hit an unbelievable £199 billion in 2009-10, fell to £140 billion in 2010-11. It needs to fall a lot further this year and next, to avoid interest charges taking up too much of the rising spending.
The overall balance sheet shows total UK state debt at £2252.9 billion, or around 150% of GDP. This excludes public sector pension liabilities, which would add more than an extra £1 trillion. £1.2 trillion of the debt is the consoldiation of the state’s share of its banks balance sheets. Early privatisation would make a big difference to the figures.
The UK state needs to cut the risks on its balance sheet by asset sales. It needs to reduce the amount of bond borrowing it requires, by better control over spending and by asset sales which bring in cash. It is difficult to understand the OECD’s point about slowing the spending cuts, when every year of the five year plan spending rises in cash terms. It would also rise in real terms if the authorities control inflation.