Economy

'We'd borrow more, but we'd use it better.' That was the message Ed Miliband found himself trying to get across when attacking David Cameron at PMQs today. He accused the Prime Minister of 'borrowing for failure', saying: 'He is borrowing for failure: that is the reality, and he is borrowing more for failure. That is the reality of his record. And here is the truth: they said they'd balance the books, they said they'd get growth, they haven't.' So Labour would borrow for success. What would that mean? Miliband decided to tease us by not mentioning how he'd do better borrowing. The two leaders traded quotes from various IMF staff members, as it's easy to find something in anything the IMF issues to suit your own theories about the economy.

'George Osborne is under pressure to tear up his austerity programme after Boris Johnson called on the government to drop its ‘hair-shirt, Stafford Cripps agenda,' reports the delighted Guardian today. Even Boris is against it! Even he can see that the obvious solution to our debt crisis is even more debt! Except, as you’d expect, it’s all nonsense. Kamal Ahmed at the Telegraph got it right: Boris’s problem is with Osborne’s language: talking about pain, rather than recovery. He quotes Boris: 'We need to junk the rhetoric of austerity and be confident.

We can all overdo it a little at Christmas, but the government's monthly overdraft statement — which came in this morning — is of a different order. In December, HM Treasury spent £15.4 billion more than it received in tax, a worse result than December last year where the monthly deficit was £14.8 billion. And why? Well, growth has been sluggish (we may learn on Friday that the UK economy is shrinking again) so tax revenues have fallen. But, more worryingly, state spending seems to be running out of control too. The below graph, from Citi, sums it up. The blue is what is expected (from those fiscal Mystic Megs at the Office for Budget Responsibility) for 2012-13 and the pink is what we have seen in the first nine months of that period.

'We have reduced the deficit by a quarter in just two years' — the coalition's mid-term review. True. But when Gordon Brown proposed to do precisely the same in Labour's last budget, George Osborne criticised him for not moving fast enough and endangering the economy. The ONS shows that public sector net borrowing was down 24 per cent from 2009-10 to 2011-12. But George Osborne cannot claim to have stuck to his deficit reduction plan. That has been torn up. The below graph shows Brown's plan (in the middle), Osborne's original plan (at the bottom) and his current plan (at the top): As you can see, Osborne is now cutting the deficit more slowly than Alistair Darling proposed in 2010. Darling planned to cut the deficit by 33.9 per cent by this year, compared to the 24.

When George Osborne gives his Autumn Statement on 5 December, the OBR will publish its new forecasts for growth, deficit and debt. For the last few weeks, the consensus has been that the OBR would declare that Osborne will miss the debt target he set himself in 2010: to have the debt-to-GDP ratio falling in 2015-16. The logic behind this, as I set out in September, is pretty straightforward: the OBR will have to lower its growth forecasts, which will in turn mean lower tax revenues, higher deficits and more debt. But it now looks like Osborne might narrowly avoid failure, though not because the outlook for the economy or the government finances is any brighter.

Here is the full transcript of the speech David Cameron gave to the CBI earlier today. It is, on the face of it, a speech full of intent and energy; but, two and half years into government, David Cameron will be judged by what he does, not what he says. As John Cridland, DG of the CBI, put it in response to Cameron's words: 'Where's the beef?' I look around this room and see people I’ve been on trade missions with all around the world to Africa, China, India, Russia, Mexico, Brazil. It’s great to see Aggreko here - we were in Africa together and I’m glad you’ve sealed that deal in Cote d’Ivoire and are selling in one hundred countries today.

Could George Osborne be in line for a genuine windfall? The Chancellor is getting quite good at conjuring fake ones (Post Office pensions, raiding £35 billion from the Bank of England) but he has yet to sell the 4G licenses. This could be more significant than next month's mini-Budget. The stunning success of Ireland's 4G auction (here) suggests that the UK auction may yield a lot more than is currently expected. A decade ago, governments world over pocketed massive windfalls auctioning the 3G licenses to mobile operators. This time Ofcom has put a reserve of £1.3 billion. But the Irish government expected to get just €170 million from its licenses. In the end, it raised €482 million in upfront fees with €373 million more to come by the end of the next decade.

The Eurozone is now in recession – this, at least, is what is implied by today’s avalanche of dire economic data. Eurostat has not (yet) made this calculation; but Capital Economics has. Take into account the relative size of the Eurozone economies who have declared figures and it suggests a fall of 0.1 per cent for Q3 which, which, coming after the contraction of 0.2 per cent in Q2, would meet the test for recession (two consecutive quarters of negative growth). So, like Britain, a double-dip recession. Greece and Portugal are still in meltdown. The Germans are doing okay, with growth of 0.2 per cent for Q3. This is mainly because of the fact that their currency would be worth about a third more if they had the Deutschmark.