June’s borrowing totals were not a pretty picture. The state borrowed £ 0.5bn more in June 2012 than in June 2011, after adjusting for specials. The April – June quarter saw borrowing £6.8 billion up on the same quarter a year earlier, again adjusted for the Royal Mail Pension Fund and the closure of the special liquidity scheme for banks.
However, there is some good news in the figures. At last the rate of increase in public spending is slowing. Current public spending was only 2.1% higher than a year before. Most of the increase came from benefit and state pension spending, where the substantial price related increase in rates last autumn is pushing total spending up sharply on this item.
The private sector employment figures reinforce this good news, with 800,000 new private sector jobs since the government came to office. This outpaces the job losses in the public sector which now exceed 400,000,and mean a lower cost base for the public sector going forwards.
As expected here on this blog, the main reason for the shortfall in the borrowing figures is poor revenue. Income tax receipts continue to fall in cash and real terms. This should be no surprise, as the rate for higher earnings is uncompetitive and clearly many have no intention of paying it. 2nd Quarter 2012 income tax receipts are down on 2nd quarter 2011, which in turn were down on 2nd Quarter 2010. The economy has grown a little since then and employment has risen, so it is behavioural not cyclical. The last quarter brought in £32.7 billion from total income tax, compared to £34.366 billion in the same quarter in 2010. The losses doubtless are all at the higher end, as PAYE payers on normal salaries will be paying as much or a bit more thna two years ago.
Public Sector employment: March 2010 6.323m
March 2012 5.899m
Private sector employment March 2010 22.539m
March 2012 23.382m
Some of you have pointed to the possible discrepancy between the output figures, showing two quarters of declining activity, and the employment figures, showing jobs growth. The only way both can be right is if productivity is falling. It does seem odd that it should be falling so much. It seems even stranger that despite the rate of increase of the total population from migration, actual output is down. I suspect the output figures will be revised up a bit in due course. I think I trust the employment figures a bit more.