Osborne's double whammy

UK fiscal data for May, released this morning, are ugly.  Borrowing for the month was almost £18 billion, up from £15 billion in the May 2011.  The main culprits: a 7% fall in income tax receipts, which appears to be mostly due to the slowing economy, though high earners' efforts to avoid the 50% tax rate are getting some of the blame too; and an 8% jump in public spending, driven by an 11.7% rise in welfare payments.

Opposition spokespeople have naturally pounced on the data, saying that they prove that the Government's austerity programme is fundamentally mistaken.  That's true, but what George Osborne and his pals have achieved is worse than that.  As the rise in spending shows,  they haven't actually imposed any real austerity.  In fact, Government spending has been virtually the sole source of growth in the economy in recent times.  But by banging on about budget cuts all the time, they seem to struck a serious blow to consumer and, more importantly,  business confidence.  The unwillingness of businesses to invest , even though many are sitting on significant piles of cash, is making it all but impossible for the economy to mount the sustained recovery that might allow the country to start to "grow out of" the debt problem.

The latest data will hasten efforts already under way in Whitehall to find a second round of spending cuts, which is just what the economy doesn't need. In the firing line:  welfare programmes.  David Cameron signalled this week that the Government wants to end the "something for nothing" culture that supposedly exists among welfare recipients.

One brilliant idea on the table is to reduce welfare payments in poorer regions.  I suppose it wouldn't occur to anyone in the Cabinet that such a policy might tempt a good number of benefits claimants to migrate to areas where the payments remained higher.  That would presumably include London and the South East, where local authorities have already been trying to move benefits recipients in the opposite direction because they can't afford the cost of housing them.  It was Tony Blair that used to talk about "joined-up government".   We don't seem to be any closer to achieving it.