George Osborne avoids the embarrassment of rising borrowing – but other dangers lie in wait

By Peter Hoskin
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That rush of air you just felt was from Downing Street, breathing out a collective “phew”. And the reason why? This morning’s public finance statistics from the Office for National Statistics – rounding off the financial year 2012-13 – have government borrowing falling from the previous year. But only just. The government borrowed £120.9 billion in 2011-12, once various distortive financial effects are excluded. And it borrowed £120.6 billion in 2012-13. That’s a difference of only £300 million, so again: phew.

Of course, fiscally speaking, that £300 million is next to meaningless. Borrowing could have been £300 billion higher than last year – and it might turn out to be, given that the ONS tends to revise its original figures; and, indeed, it was today on some measures – and the overall picture still would have been the same. The Government has basically borrowed the same amount of money for two years in a row. It’s all very different from what was expected three years ago, when the Treasury was working on an assumption of 2.9 per cent growth in 2013.

But politically, of course, that £300 million makes all the difference. Having “public sector net borrowing” declining year-on-year is not one of George Osborne’s fiscal rules, but it has been part of his promise. His opponents will not be able to accuse him of borrowing more than he was last year – at least for the time being.

As it happens, something similar could be said in anticipation of this week’s growth figures. The expectation amongst economic soothsayers is that the economy will have grown by 0.1 per cent in the first quarter of the year. If that turns out to be true, then it would mean that Britain is basically flat-lining. But it would also mean that no-one would be able to charge Mr Osborne with presiding over a triple-dip. The politics, in this case, are far less fractional than the numbers behind them.

But this doesn’t mean that the Chancellor’s immediate political concerns will be over should he avoid a return to recession, just as he avoided an increase in borrowing today. No, his opponents – both inside and outside the Tory party – are far too tenacious for that. Just look at this story in today’s Daily Mail. One “senior backbencher” tells the paper that “even if we avoid a triple dip there aren’t many people who believe it is going to turn around in the autumn.” Another warns, “there should be a steadier and more mature hand on the tiller.”

Myself, I don’t think the Tory discontents will achieve much with their attacks on George Osborne. As I said in an article for the Times (£) last year, when the grumbling first came into public earshot, the Chancellor is too bound up with the Coalition’s economic plan to be cast aside now. And besides, with coalition government being like it is, there’s little reason to believe that a replacement would be able to do things differently. You can put any hand on the tiller, and it would still have to steer a course determined in the consultation with the Lib Dems.

Surely the backbenchers know all this, though, which is why I suspect their attacks on Mr Osborne are actually attacks on David Cameron – and on the Coalition itself – by proxy. And this is why Downing Street ought to take them seriously. No doubt growth would help make things better, but so might something like the “big, open, comprehensive offer” I wrote about in a ConservativeHome column in November.

For his part, the Chancellor certainly seems to be taking a different approach. He has been more visible and punchier recently, and he’s continued that today with an appearance on the Today Programme and an attack on the economics of Scottish independence. And, as his last Budget showed, he is also tending more towards pub-ready policies that may not fix the macro-economy but which are popular with voters. As Tim Montgomerie put it last month, “Plan A for deficit reduction is on the back burner and plan B(eer) for re-election is underway.”

Which is why today’s hints about fuel duty are also worth noting. The Tory leadership is preparing for a “living standards election”. At least more can be done on that front than if it was a “borrowing and growth election”.