21 Jul 2011 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.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.
Friday 22 July 2011
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