WHEN the current British government took office, chancellor George Osborne said in his first Budget that he aimed to "have debt falling and a balanced structual budget deficit by the end of this Parliament". With eight months to go before the election, the ONS announced yesterday that public sector borrowing in the first six months of the current financial year was £45.4 billion ($74.2 billion); higher than the deficit for the same period in the previous year. This seems particularly surprising, given the recovery in the economy*. And it raises some questions about whether there may be structural reasons why the deficit is much harder to close than before.

The weakness, according to the Office for Budget Responsibility, is in part down to income tax receipts which are 0.8% lower year-on-year. Two factors may be at work; at the start of the 2013-14 tax year, the top rate of tax was cut from 50% to 45%. That undoubtedly caused some high-earners to shift their income from 2012-13 to the 2013-14 tax year. That boosted income tax receipts in the early month of last year, and has slowed the annual change now. Secondly, a lot of the new jobs being created are part-time or low-paid. Those who earn less than £10,000 do not pay income tax at all.

So what about the cuts? Clearly, there have been big squeezes in certain areas, such as funding to local councils. The problem for the government is that it has to run fast to stand still. Here are the figures from the ONS for the first half of the year. Even with ultra-low interest rates, the interest cost in the first half of 2014 was £24 billion, compared with £14 billion in the first half of 2009, the year before the goverment took office. Social benefits have risen from £79 billion to £95 billion over the same period.

Take those numbers out of the totals for current expenditure and "other spending" has risen from £186 billion to £210 billion over the same period, a 12.9% nominal increase. Inflation has risen 15.1% over the last five years, so that it is a cut in real terms. But it is tough going. Total current expenditure in the first half of the year was £330 billion, compared with £279 billion in H12009. For a full year comparison, 2013 current expenditure was £637 billion, compared with £562 billion in 2009.

The big cut, of course, has been in net investment which was £32 billion in the first half of 2009 and was only £18 billion in the first half of this year. The full year numbers were £55 billion in 2009-10 and £31 billion in 2013-14 (just £26 billion in 2011-2012). In Keynesian terms, this is the wrong thing to cut since capital spending is the most likely to have a multiplier effect on the economy.

Total tax receipts in the first half of the year were £302 billion, compared with £308 billion in H12013, £284 billion in H1 2012, £276 billion in H1 2011, £263 billion in H12010, and £246 billion in H12009. So on the first half figures alone, taxes are up £56 billion and current expenditure is up £51 billion over the last five years. Running to stand still, as I say.

So perhaps there is a fundamental problem. On the tax side, our more unequal society has resulted in a large proportion of revenues coming from a small number of taxayers, both individual and corporate. The top 1% of taxpayers paid 28% of all income tax in 2013-14. The return on bank equity has fallen and this has kept the lid on bonuses; a good thing, most people may think, but bad for the taxman. Push the rate up too high and many of these people may go elsewhere; the banks they work for are largely foreign. The rest of the workforce is barely seeing any real wage growth. The net effect is that, while employment is up 5% over the last four years, income tax receipts have fallen 4% in real terms. Meanwhile the government is slashing corporate tax rates to try to attract business to the country.

On the spending side, there is a limit to how much the goverment can squeeze. A commitment to preserve NHS spending in real terms has done little to protect the goverment from attacks on this issue by Labour, whose leader pledged to add £2.5 billion to health spending in his conference speech; pensioners have also been ring-fenced with their incomes being linked to inflation.

It is easy to imagine that the deficit will not close by the end of the next Parliament either. No doubt the Chancellor is very happy that the Bank of England owns £375 billion of gilts and currently hands back the interest to the government. Imagine what the finances would like without this help.

* There is a methodological change to do with the treatment of the banks, but that probably doesn't affect the numbers on taxes and spending.