Chancellor struggling to rein in state borrowing
THE GOVERNMENT borrowed £11.8bn in September – £1.6bn more than the same month last year.
Chancellor George Osborne might have been hoping to offer one or two pre-election sweeteners in December’s Autumn Statement, but yesterday’s figures acted as a reminder of the limited fiscal leeway that he has at his disposal
So far, this fiscal year (starting in April) £58bn has been borrowed – £5.4bn more than in the same period last year. The figures, published yesterday by the Office for National Statistics, exclude public sector banks.
“Weak tax receipts are the main source of the problem, with income tax being a particular cause for concern,” said Martin Beck, senior economic advisor to the Ernst and Young ITEM Club.
The Office for Budget Responsibility, set up by the government as an independent fiscal watchdog, forecast much stronger growth in tax receipts and an overall reduction in borrowing.
So far though, tax revenues have been disappointing – income tax and national insurance contributions raised only an additional 0.5 per cent of revenue in the past six months compared with the same period last year.
However, numbers crunched by accountants BDO show income tax receipts in September were 3.1 per cent higher than in September 2013. Corporation tax receipts rose by five per cent, reflecting strong business activity. But these gains were not enough to improve the nation’s finances.
“Borrowing would have to be a whopping £17bn, or 37 per cent, lower than last year in the remaining six months of the fiscal year for the annual total to match the OBR’s March forecast,” said economist Samuel Tombs of Capital Economics.
Government debt excluding public sector banks now stands at 79.9 per cent of GDP. “The UK’s weakened public finance performance makes it even more unlikely that either Moody’s or Fitch will restore their AAA credit rating for the UK anytime soon,” said economist Howard Archer from analytics firm IHS.