Chancellor George Osborne’s deficit-cutting credentials were dealt a severe blow today after the biggest rise in government spending for four years.
The latest estimates of UK first-quarter growth showed a surprise 1.6% rise in public spending, up from 0.5% in the previous quarter, which the Office for National Statistics put down to rises in health and defence spending. The figures represent the biggest jump in public largesse since the beginning of 2008, with higher welfare bills also likely to add to the pressure.
With overall growth marked down to -0.3% — deepening the UK’s double-dip recession — today’s expenditure breakdown underlines the fact that the economy would be performing even worse under a more effective austerity programme.
ING Bank’s James Knightley said: “There have not been the falls in government spending that would normally be happening.
“If they are committed to cuts why aren’t they coming through in the ONS figures?”
In March, the Office for Budget Responsibility acknowledged that spending cuts were taking longer to come through as it raised estimates for government consumption this year.
There were positives, however, as the figures showed 0.7% knocked off growth by firms running down stockpiles.
This should boost growth in subsequent quarters as companies resume production.
