The public purse is usually in surplus in July, when a large amount of tax payments are received, but the crippling effect of the recession was startling last month as tax receipts plunged. Corporation tax receipts were down by 38pc, compared with a year earlier, while social and benefit spending rose by 9.5pc, figures from the Office of National Statistics (ONS) showed. Last month was the first time a deficit was recorded for July since 1996, a year before Labour was elected, and the worst deficit recorded going back to 1993. Economists had expected a deficit of just £600m. July’s £8bn deficit compared with a surplus of £5.2bn in the same month last year. “This is worse than bad. Corporate tax receipts are usually strong in July but no one is making any profits. At this rate, the Chancellor is going to overshoot his borrowing forecasts by at least £20bn,” said Alan Clarke, an economist, at BNP Paribas. Total net borrowing since the beginning of the financial year now stands at £49.8bn - more than three times the £15.9bn borrowed at the same point last year. In April Alistair Darling predicted the Government would borrow a total of £175bn in 2009/10. After the July public finances figures were published Vicky Redwood, economist at Capital Economics, said the figure was now more likely to be “at least” £200bn. “The dire public finance figures underlined the need for a severe fiscal consolidation,” she said. The Government will in part be helped by the reversal of the VAT cut in January, when rates will return to 17.5pc from 15pc, but some fear that will not be enough. “If the economy remains weak then the toll on the public sector finances could end up being truly horrible,” said Colin Ellis, economist at Daiwa Securities. Net debt is now £800bn, equivalent to about 57pc of gross domestic product. However, there was more encouraging news on retail sales and mortgage lending. UK retail sales rose 0.4pc in July from June, taking the annual gain to 3.3pc, according to figures from the ONS. The annual figure was the highest since May 2008. The monthly gain had been expected to be smaller, following the strong 1.2pc increase in June. Mortgage lending jumped by 26pc during July to £16bn as the housing market showed further signs of improving, according to the Council of Mortgage Lenders. However, it cautioned that activity still remained subdued by historic standards, with lending last month the lowest for July since 2001 and well down on the average of £27bn seen during the past seven years.Alistair Darling 'to miss' UK borrowing target after record July deficit as tax take tumbles
Alistair Darling, the Chancellor, will miss his Budget forecasts for borrowing, economists said on Thursday, after official figures revealed the Government borrowed £8bn in July - the worst July deficit on record.
Sunday, 23 August 2009
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