You are here:   Columns >  Marketplace > Assessing Osborne

George Osborne: How have the nation's finances fared under him?

With the general election now only weeks away, George Osborne must be glad to have been Chancellor of the Exchequer for a full parliamentary term. But he is unlikely to remain Chancellor in the next government and it is time to assess his performance. How have the nation’s finances fared in his five years as their custodian?

First, no previous full-term Chancellor has incurred debt on such a scale. On average the government has borrowed £100 billion a year since 2010. Although his immediate predecessor, Alistair Darling, ran up debt even more quickly in the crisis years of 2008 and 2009, Darling at 11 Downing Street was overshadowed by Gordon Brown at 10 Downing Street. In effect, Gordon Brown’s stewardship of the public finances lasted from May 1997 to May 2010. In that 13-year period the public debt typically rose by under £50 billion a year, slightly less than half the rate under Osborne.

Second, interest rates in the last five years have been the lowest in history. When Osborne was appointed Chancellor in May 2010, the Bank of England’s rate was 0.5 per cent; if and when he leaves the Treasury in May 2010, the Bank rate will still be 0.5 per cent. As the Bank rate had never been under 2 per cent before May 2010, Osborne has in this respect been the most fortunate British finance minister ever.

Interest on central government debt was £44.8 billion in 2010, when the present government came to power. Last year it was higher, at £49 billion, but the increase of under 10 per cent compares with a leap in public debt of almost 50 per cent. Moreover, despite all the disappointments on the productivity front, national income and output have grown in money terms since the Conservative-LibDem coalition was formed. So the ratios of interest payments to the national income and the overall tax take have declined.

Osborne appears to have achieved the miraculous. He has combined budgetary overspending with a reduction in cost of the debt burden. Future taxpayers will certainly be grateful for his government’s success in selling large amounts of long-term debt at remarkably low interest rates. In the 2014/15 financial year about £30 billion of long-dated gilts with an interest coupon of beneath 3 per cent are likely to have been bought by investors. The proceeds from these transactions will be used in part to redeem the 3.5 per cent War Loan stock and the small 4 per cent Consolidated Loan stock.

View Full Article
March 27th, 2015
9:03 AM
"Assessing Osborne"? “But, on the same basis, the recent recovery has actually been slightly faster than during Thatcher's hey-day. “  {July 2011}. Due to G.B. quickly implemented stimulus package? dsq-content Then came 'Austerity' {which relied on the new voodoo economics - the Barro/Ricardo equivalence proposition? " . . . the current recovery in the UK is the slowest in 300 years . . . " Then Plan B? " He has combined budgetary overspending . . . " “Even Britain has now abandoned austerity And while Osborne will never publicly admit this, the big surprise of his budget is its implicit acceptance of this Keynesian view. Instead of trying to reduce borrowing any further or aiming for a balanced budget, as it originally promised, the British government has now accepted that deficits will keep rising in absolute terms and will still be worth 6% of GDP by the next election in 2015. That would leave Britain with by far the highest deficit ratio among the major economies after five years of unprecedented austerity. Meanwhile the U.S., with comparatively little fiscal effort, is projected to reduce its deficit to just 2.4% by 2015. We are still looking at borrowing of £108 billion this year – nearly £50 billion more than planned back in 2010.”

March 27th, 2015
9:03 AM
"Assessing Osborne" ". . . Osborne has in this respect been the most fortunate British finance minister ever. " And this? "One economist, Alan Clarke at Scotiabank, says the compensation payments have been more successful at stimulating the U.K. economy than quantitative easing. U.K. lenders have already paid £11.5 billion ($18.7 billion) to millions of customers, and have set aside another £7.3 billion for future payments. But the payments are not just creating one-off windfalls: the PPI industry is also creating much-needed employment. As we report over on, claims have been coming in at such a clip that it’s created tens of thousands of new jobs to handle them.” {the PPI payments are being used as a down payment for new cars?}.

Post your comment

This question is for testing whether you are a human visitor and to prevent automated spam submissions.