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Austerity Failing in Europe

 
 
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A funny thing happened on the way to deficit reduction:
 

The UK saw its worst April public sector net borrowing on record last month as tax receipts fell, the Office for National Statistics said.

Public borrowing, excluding financial interventions such as bank bail-outs, hit £10bn, compared with £7.3bn the previous year.

The ONS said tax receipts in April last year were boosted by a one-off bank payroll tax which raised £3.5bn.

April's figure was higher than many analysts' expectations of about £6.5bn.

Economists said the figures were a surprising disappointment.

"The public finances have got off to a pretty bad start this year," said Hetal Mehta, at Daiwa Capital Markets. She warned that the position could worsen if economic growth was weaker than expected.

Samuel Tombs, at Capital Economics, said he believed the government would struggle to meet its borrowing forecasts this year.

However, he added: "Nonetheless, these are just one set of figures and the trend in borrowing should improve as more of the spending cuts kick in later this year."

A spokesman for the Treasury said: "One-off factors affected borrowing, but it is clear from the downward revision to last year's borrowing figures that the government's deficit reduction strategy is making headway in dealing with our unsustainable deficit."

David Kern, chief economist at the British Chambers of Commerce, said it was clear that the government's plans to reduce the deficit by more than £20bn over the year was proving difficult.

But he said the government must press on with its plans. "The fragility of the economic recovery is creating a difficult backdrop, but the government must not deviate from its strategy to restore stability in the UK's public finances," he said.

"Businesses support the measures being taken to reduce the deficit, and the emphasis should be on spending cuts rather than tax increases," Mr Kern said.



Clearly, the problem is that they just haven't cut enough. It's probably time to think about another round.



As Krugman wrote yesterday

in his column about the failure of austerity in Europe:



My guess is that it’s just not willing to face up to the failure of its fantasies. And if this sounds incredibly foolish, well, who ever said that wisdom rules the world?

Not me.

Hullabaloo / By Digby | Sourced from

Posted at May 24, 2011, 10:06am