Ahead of this year’s Budget here are some of the key numbers, and charts, to keep an eye on.
First, here’s total government spending
The big picture. One question is whether the extra spending cuts George Osborne imposes bring the total government spending figure down to the lowest level since the 1930s, as they did in a previous Budget (until he quickly changed them to make the cuts look a little less severe).
Then there are the Chancellor’s two fiscal rules.
The first is that he needs to get the national debt falling (as a percentage of GDP) each year. Here’s what the Office for Budget Responsibility predicted would happen to net debt at the Autumn Statement in November:
A few months ago this rule looked like a formality. But since the Autumn Statement the overall economy has weakened. At the same time, the total debt has increased. According to some economists, it’s a toss up as to whether Mr Osborne will miss the rule, with net debt actually rising this fiscal year (2015/16) rather than falling.
Then there’s the second rule: the surplus rule.
This says that the Chancellor needs to have a surplus in 2019/20, in other words to be generating more taxes than he is spending each year. This is no mean feat: surpluses are rare beasts in UK economic history. Nonetheless, in November the Treasury was planning to meet the rule with room to spare, £10bn of room, to be precise.
But since then, things have got tougher. Because of the weaker economy, and because the Chancellor still has a few expensive election commitments to fulfil (including the pledge to raise the levels at which people start to pay tax at the basic and lower rates, he may need to cut spending a little more in order to reach that surplus in 2019/20.
The good news for the Chancellor is that because this all happens some way off in the distance, he could back-load those spending cuts in 2018/19 and 2019/20 and still meet this rule.
Finally there’s the question of whether, even if he manages not to break those rules, the Chancellor has to raise his borrowing forecasts. As you can see from the chart below, net borrowing is currently shrinking, but maybe not quick enough to meet the targets the Chancellor set for himself only four months ago.
In other words, there is very little fiscal wiggle room for the Chancellor this time around. And mainly because of those rules he set himself…