UK fiscal data: nothing to like

The ONS released public sector revenue, spending and borrowing data for March, and for the 2011/12 fiscal year, earlier today.  The official release predictably focuses on the fact that borrowing for the full year, at just under £126 billion, was in line with budget targets, but if you look even a little way behind the headline, there's very little to like in the underlying data, regardless of where you sit on the political spectrum.

Even that headline number itself is a bit of a disappointment. A couple of months ago, the year-to-date deficit was tracking so far below the target that a few commentators, your humble blogger not excepted, ventured to suggest that the full-year figure would be as much as £10 billion below budget.  However, the shortfalls ballooned in February and March, which could be a very ominous development if it means -- and it probably does -- that signs of slower GDP growth in recent months are taking a toll on the public finances.

Looking at the revenue and spending data, a couple of things stand out.  First, most of the burden of cutting the deficit is still being borne by taxpayers.  Central government revenues rose 4% for the full fiscal year;  public spending, supposedly subject to a vicious squeeze, also posted a 2.0% INCREASE!   Net social benefits, cut to the bone and beyond if the pleadings of special interest groups are to be believed, actually rose by 4.9%.  Interest payments on the debt also rose, somewhat surprising in light of the Bank of England's strenuous attempts to keep borrowing costs down.  The only category of spending to decline was, alas,  net investment, which fell 40% (!) year-on-year, and is now 60% (!!) down from its all-time peak, set just a couple of years ago.

Even before these numbers appeared, the Government had announced that the Treasury was putting pressure on spending departments to find another 5% in expenditure cuts.  It's all to likely that the bulk of these will again come from investment spending, which is the last thing the economy needs,  from either a long-term or short-term viewpoint.

Tomorrow sees the release of Q1 GDP data, which are expected to show that the economy eked out at best a marginal gain for the quarter.  But even if the feared "double dip" has been avoided, most commentators are likely to revise their forecasts for the full year downwards yet again, citing the economy's lack of momentum, the renewed problems in the Eurozone, and one-off factors like the Queen's jubilee. Taken together, the fiscal and GDP data are likely to make Labour's Ed Balls think Christmas has come really early for him this year.  He's likely to do a clog dance all over the Government, and it would be hard to deny him that right.