UK government borrowing figures dent deficit reduction target

The coalition government borrowed more than expected in June, putting chancellor George Osborne further off course in his plan to reduce the deficit.

Borrowing totalled £11.4bn over the month, higher than the £10.7bn forecast by economists, and £3.8bn more than in June 2013.

Stripping out the impact of a one-off cash transfer from the Bank of England in June last year, borrowing in the first three months of the 2014-15 fiscal year was £36.1bn, 7.3% higher than the same period last year, according to the Office for National Statistics.

At the time of the March budget, the Office for Budget Responsibility – the Treasury's independent forecaster – predicted a fall in government borrowing this year to £95.5bn, from £105.8bn in 2013-14.

Howard Archer, chief UK economist at IHS Global Insight, said: "The overall performance for April-June has clearly not been the start to fiscal year 2014-15 that George Osborne would have been looking for. One-quarter of the way into the tax year it looks like the chancellor faces a battle to achieve his fiscal targets for 2014-15 and he will certainly need growth to hold up."

Economists said that the state of the public purse should improve later in the fiscal year. The annual comparison looks bad partly because of higher-than-usual income tax payments early last year, which were the result of tax changes. The figures last year were also boosted by receipts from a Swiss tax avoidance deal.

The Treasury said: "Today's public sector net borrowing figures continue to be in line with the budget forecast, which predicts the deficit to have halved by the end of this year. But the job is not yet done which is why we must continue to work through the plan that is building a resilient economy."

The UK's national debt was £1.3tn at the end of June, equivalent to 77.3% of GDP.

Chris Leslie MP, Labour's shadow chief secretary to the Treasury, said: "Borrowing is now expected to be almost £190bn more than planned under this government. This is the cost of three damaging years of flatlining and falling living standards we have seen since the election."

Powered by article was written by Angela Monaghan, for on Tuesday 22nd July 2014 11.32 Europe/London © Guardian News and Media Limited 2010


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