Conservative thinktank says government has no hope of eliminating deficit and only slim chance of cutting debt by 2015
The coalition is “most unlikely” to meet its two key economic goals before the general election, a conservative thinktank says.
In a report published on Monday, the Centre for Policy Studies (CPS) said the coalition had already given up hope of getting rid of the structural deficit by 2015 and that the chance of ensuring that public-sector debt is falling by the time of the next election is now slim.
The CPS, whose claims are rejected by the Treasury, also said the government’s problems were exacerbated by the fact that many people do not understand the difference between debt and deficit and that they will be shocked to learn that debt (the historic total owed by the nation) will be around £600bn higher in 2015 than it was in 2010 even though the deficit (annual borrowing) will be lower.
The coalition “will be vulnerable at the next general election when opposition parties could argue that the huge increase in debt is primarily the result of economic incompetence”, the CPS report said.
George Osborne, the chancellor, insists his deficit reduction target has always been a rolling mandate and that, as long as Treasury budget plans will eliminate the structural deficit over the following five years, his target is being met.
But the CPS said that when Osborne announced his target in 2010 people assumed it meant the structural deficit would go by 2015. The Treasury now accepts this deadline will not be met.
The second deadline, involving debt falling as a proportion of GDP by the end of the parliament, is firmer. “But this rule too is now unlikely to be met,” the CPS said.
The CPS commissioned a poll to find out whether people expected debt to go up or down between 2010 and 2015. Although the government has always said that debt is expected to rise over this period, 47% said they thought the government expected it to fall. Only 10% of respondents said, accurately, that the Treasury expected it to rise.
“There must be a danger for the coalition parties that this could easily be exploited during public debate in the buildup to the next election,” the CPS said.
The Treasury rejected the CPS analysis. “The independent Office for Budget Responsibility’s (OBR) most recent assessment is that the government is broadly on track to meet its debt and deficit targets,” a spokesman said. “The OBR will update its forecasts in the autumn.”