Tuesday, February 22, 2011

From the Archives: January borrowing

I thought given the fact that we have seen a £3.6bn surplus this January, that it would be useful to revist my comments from this time last year in a post entitled Double dip recession, or did it never end?

"Perhaps the most worrying economic indicator towards a double dip though is the record government borrowing in January. I say record, but for the first time since records began the UK government have had to borrow money in January which is a terrible sign. Traditionally January is a very good income month for the government with VAT from increased Christmas sales, and income tax from the self employed. In total tax receipts were down 11.8% compared to last year meaning that the self employed and businesses have been hit hard. Either they haven’t made as much money in the past year as they did the previous year or in a potentially even worse situation they can’t afford to pay the tax they already owe. Neither situation is good news"

At the time I was clearly wrong, we didn't thankfully double dip and we were out of recession. I also wrote "Brown continues to tell us that we are best placed to come out of recession and that the recovery is fragile and any spending cuts will destroy it." . Now I know technically spending cuts haven't hit yet, but clearly in annnouncing them and announcing some policies for growth what we've created is confidence for business, which is generating growth. With growth we can therefore cut government spending without fear of a collapse in GDP. Basically Brown was wrong.

The media is saying today that this is the first surplus in January for 2 years, but last year they were reporting that it was the first time we'd ever had to borrow money in January, so I'm not sure if I was wrong then, or the media is wrong now. I'm sure I could go look it up, but I've got a real job to do too!

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