Tuesday, October 21, 2008
How big a borrowing overshoot?
Posted by David Smith at 12:45 PM
Category: Thoughts and responses

September's public borrowing figures, showing net borrowing of 8.1 billion and a cumulative April-September figure of 37.6 billion have attracted plenty of headlines. With six months of the fiscal year to go, Alistair Darling is already close to his 43 billion target. The question is whether the borrowing numbers will follow the usual "front-loading" pattern. The easiest thing with the public borrowing figures is to take the first six months and double it. Usually, that would also be the wrong thing to do.

In 2007-8, for example, net borrowing was 21.5 billion for the first six months and 35.8 billion for the full year. Scaling up, that would give a figure of 62.6 billion for 2008-9, based on the first six months. What we don't know is the extent to which the downturn/recession will affect that front-loading pattern.

Meanwhile, we have two figures for public sector net debt. Excluding Northern Rock is is a very respectable 37.9% of GDP. Including it, debt rises to 43.4% - still low but with other banking rescue effects to be added in.