Comment: Public finances ride out austere medicine

Martin Flanagan
Martin Flanagan
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NEXT year’s general election, if it wasn’t challenging enough for David Cameron already on the Ukip front, has arguably just got tougher. Britain’s worsening public finances in the first six months of the current tax year mean Chancellor George Osborne will need some impressive legerdemain to furnish genuine voter sweeteners.

In one sense, the Tory-led coalition government has some slack amid poor public finances because it has already admitted publicly to electors that its original aim to largely eliminate the deficit in its first term from 2010 will not be met.

Even so, apparent lack of meaty progress in meeting the commitment after more than four years of austerity policies from Cameron and his Lib Dem partners will be seized up by Labour, still ahead in the polls. Less so by Nick Farage and Ukip, probably, as that party does not seem to do finance in any meaningful way (although, to be fair, Labour’s Ed Miliband did not address it either in his party conference speech).

Ukip wants to pull up the British drawbridge and exit the European Union, and, that’s about it, actually, with little said about what the party would do on deficit reduction.

British government borrowing was 15 per cent, or £1.6 billion, higher at £11.8bn in September compared with the same month in 2013, new data showed yesterday – somewhat embarrassing given the Chancellor aimed at the March Budget to reduce the deficit by more than 10 per cent over the following 12 months.

Public borrowing over the longer six-month period from April to September stood 10 per cent higher than for the same period last year, showing we are not talking about a temporary blip in an otherwise smooth progression out of the deficit.

And, ironically, the government will not make too much political play of one of the factors affecting the latest data – that much weaker-than-expected earnings growth and a greater number of people now self-employed or in low-paid jobs has limited income tax receipts.

It is arithmetically right, but less than politically palatable. The latest disappointing news on the public finances suggests Osborne was creating a hostage to fortune in his more optimistic noises on deficit reduction made last spring.

It might come back to haunt the government as it enters the home straight towards the election if the darker picture persists.

Costa living is good as hotels eye Germany

WHITBREAD’s budget Premier Inns hotel business and Costa coffee shops have both virtually defied gravity in terms of like-for-like sales growth for several years.

It has allowed the leisure group to shrug off the most recent British recession in 2008-9, and its extended pallid economic aftermath, to come out the other side smiling, evidenced yet again by the latest upbeat interim trading results.

When bad times hit business people downgraded from posh hotels to budget hotels like Premier, while the modern public’s insatiable desire to drink skinny lattes while working on their computers and simultaneously listening to music has proved a boon for Costa.

Latest like-for-like sales have risen 9.6 per cent in Premier – which is now moving into Germany – and 6 per cent at Costa.

There may be more “defensive” businesses on the landscape; I can’t recall them, though.