Friday, 22 July 2011

UK borrowing climbs in June

Britain’s public sector borrowed more in June than it did a year earlier, highlighting

the difficulties the Chancellor faces in hitting his target to shrink the annual overshoot

in spending.

Pile of english money in studio
The UK borrowed more in June than in did the previous year Photo: Alamy






The public sector borrowed £14bn last month, the Office for National Statistics reported, an increase on the £13.6bn seen a year earlier and disappointing market expectations for a fall. The rise mainly reflected the fact that central government spending was £2.3bn up the previous year, while receipts from taxes and other income grew only £2.1bn.

With nine months of the financial year to go, economists warned that the Chancellor must cut borrowing by around £2bn a month compared with last year’s figures, in order to meet his target of bringing it in for the year at £122bn.

“No easy feat,” said Nida Ali, economic advisor to the Ernst & Young ITEM Club. “With economic growth looking likely to disappoint, tax revenues are set to continue to undershoot.”

For the first quarter of the financial year as a whole, the picture was rosier, as borrowing came in £400m under last year’s figure, at £39.2bn. The improvement was better than the comparison might indicate, as the previous year saw a one-off £3.5bn boost to the Treasury’s coffers from the bank bonus tax in April 2010.

The Office for Budget Responsibility (OBR), the government’s independent spending watchdog, said it expected stronger growth in revenues over the rest of the year, as the distortion from the bonus tax drops out and the levy on banks starts to show up in the accounts. The Treasury said the figures showed that its austerity plans are “on track”, pointing to the underlying trends.

However, the OBR based its forecast that the Chancellor can bring borrowing down to £122bn on the assumption that the UK economy will grow 1.7pc this year. The consensus forecast among economists is now for just 1.3pc growth, which means the Treasury is likely to collect less in taxes.

“With economic growth expectations continuing to be trimmed, the risks for revenues remain to the downside,” said economists at RBS. July, a major month for tax revenues as the quarterly corporation tax receipts come in, is likely to prove a big test of whether the Chancellor is on track with his plans.

The Treasury and the OBR use figures stripping out the impact of the banking sector bailout in setting and assessing debt and borrowing targets.

The total public sector debt, stripping out the impact of rescuing the banks, stands at £944.3bn, equivalent to 62pc of gross domestic product (GDP). When financial interventions are factored in, it is £2.28 trillion, or 149pc of GDP.


There are only so many ways that you can say that the media has lost it, and only so many times that you can say it before you begin to bore even yourself. But that does not make it any different. The media has lost it.

Alongside the euro, what should be front page news in the comic section (the bit round the business news) is this.

According to the Office for National Statistics, public sector borrowing topped £14 billion in June, higher that £13.6 billion borrowed in the same month last year. Therefore, despite Osborne's promise to cut the deficit (but not the national debt), we are looking at a year-on-year increase.

The ONS is saying that last month's poor figures stem from an increase in public spending of £2.3 billion, against the previous year, while receipts grew only £2.1 billion. What price "cuts"?

Baby Osborne and his mate little Dave are now going to have to screw down borrowing, chopping at least £2 billion a month out of the system if he is to come inside this year's target of £122 billion.

Yet even that is a soft target – it means the deadly duo are "only" going to increase the national debt by £122 billion, if they meet their target. And now, the chances of doing that are vanishingly small.

The last time I wrote in this vein, incidentally, it was in terms of observing the unreality.

Given the growing detachment of the Scumset from even their brand of unreality, perhaps we should be petitioning Murdoch to change the man pretending to be our prime minister. Since he runs the universe, that is the least he can do for us.