Chancellor’s borrowing may dent deficit targets
Wednesday 23 July 2014
The Chancellor is already in danger of busting borrowing targets for this year after more disappointment on the public finances, experts warned yesterday.
George Osborne’s fiscal watchdog, the Office for Budget Responsibility, forecasts the deficit falling from £108bn to £95.5bn for the current financial year, but the latest figures showed borrowing of £11.4bn in June – worse than City fears and just £100m lower than a year earlier.
Stripping out the effects of the transfer of Royal Mail pension assets and proceeds from the Bank of England’s money-printing programme on to the public books, borrowing for the first three months of the financial year totalled £36.1bn, £2.5bn higher than last year.
“Since the OBR expects the deficit to be about 10 per cent lower this year as a whole, the fiscal consolidation still seems to be off-track,” Capital Economics UK economist, Samuel Tombs, said.
“It looks like the Chancellor faces a battle to achieve his fiscal targets and he will certainly need growth to hold up,” IHS Global Insight’s Howard Archer added.
But the picture should improve as the year goes on because the Treasury’s coffers were artificially boosted in April and May 2013 due to deferred payments to take advantage of the new lower 45 per cent top rate of income tax, as well as a £900m tax settlement over UK funds held in Swiss bank accounts.
Rowena Crawford, a senior research economist with the Institute for Fiscal Studies, said: “There should be a significant boost to income tax receipts from self-assessment in the last three months of the current financial year.”
Aside from income tax, receipts for VAT and corporation tax last month were much stronger, reflecting a stronger economy. VAT takings were up 5.5 per cent year on year, corporation tax was up 17.9 per cent and stamp duty – due to the rapid recovery in the housing market – up 43 per cent to £1.1bn.
Victoria Clarke, an economist at Investec, added: “While the numbers for the fiscal year to date suggest some catch-up is needed to meet the borrowing forecasts, our inclination is not to be too concerned at this point. The economic backdrop is clearly favourable and this should support not only income tax inflows but the broader receipts base too.”
The figures also showed the nation’s net debt hit a new high of £1.3 trillion – equivalent to 77.3 per cent of GDP.
- 1 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 2 Dog thinks owner is drowning in lake, dives in and tries to pull him out
- 3 Thank heavens for Louise Mensch and her foul-mouthed tweets to world leaders
- 4 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 5 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Greece elections: Greek PM Alexis Tsipras takes aim at 'neo-liberal' Europe as country gears up for prolonged austerity battle
Auschwitz liberation 70th anniversary: Woman sent to three Nazi death camps describes surviving gas chamber
Prince Philip set to be knighted by Australia: Celebrate by reading his greatest gaffes
New York snow: Winter Storm Juno downgraded as 'one of the largest snowstorms in history' fails to show
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
Leaked documents show Ukip leaders approve NHS privatisation once it becomes more 'acceptable to the electorate'
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...