Yesterday the government reported that its additional borrowing in May amounted to £17.4 billion, £1.1 billion less than in May the previous year.
In the first two months of 2011-12 total borrowing reached an additional £27.4 billion, compared to £25.9 billion in the same period the previous year.
Total national debt as a proportion of National Income ( excluding the bank debt, PFI, PPP and pension deficits) hit 60.6% compared to 53.8% a year earlier.
These borrowing figures confirm the pattern in the Red Book and regularly reported on this site. Public spending is still rising overall. Public debt is not yet at an alarming level in relation to the size of the economy, but the government does have to tackle pension liabilities and state owned banks as the totals are much higher than the stated narrow public debt figures.
It is difficult looking at these figures to claim that overall the government is cutting spending too much. If fiscal stimuli worked the UK economy should be picking up speed, as this still represents a huge fiscal stimulus. The fact that we have had a flat performance for the last six months shows there is no automatic boost from borrowing more by the state.
The markets do believe the Uk government will curb its deficit, and this belief has allowed the Bank to keep interest rates low so the government can carry on borrowing on affordable terms. The numbers tell us that the government will have to get tougher from here to bring the monthly increases in borrowing down from current levels. This remains essential to keeping the confidence of markets.
As recent events in Greece have shown, a country with high borrowing that is not under control and coming down can end up with very high interest rates indeed. This in turn becomes self defeating, as more and more of the tax revenue goes on paying the interest on all the debt. The tax revenues this year are rising strongly as planned following the tax increases. Spending is also still rising above the forecast rate of increase.