George Osborne tonic as borrowing shrinks £1.3bn

 

The Chancellor, George Osborne, was handed more good news on the economy yesterday as the Institute for Fiscal Studies (IFS) said borrowing could be as much as £13bn lower than the Government’s target this year.

August’s net borrowing of £13.2bn was £1.3bn below a year earlier, the Office for National Statistics (ONS) said. Stripping out one-off factors such as the transfer of the Royal Mail pension fund and Treasury proceeds from the Bank of England’s money-printing programme, the deficit in the first  five months of the new financial year was £3.7bn lower at £46.8bn.

Mr Osborne is attempting to meet a £120bn borrowing target for the year set by the Office for Budget Responsibility (OBR). August saw a  2.2 per cent fall in total current spending, compared with a 1.4 per cent rise in receipts. Total current spending is still rising over the year so far, but at a much slower rate than receipts.

IFS senior research economist Rowena Crawford said: “While the monthly data are volatile, the picture over the first five months of this financial year is one of faster growth in receipts than the OBR forecast for the year as a whole.

“A simple extrapolation of borrowing would suggest that borrowing this year, while still historically high, could come in around £13bn lower than forecast.”

The IFS said stronger growth was partly responsible for the improvement but added that tax payments delayed until April by high earners to benefit from the cut in the top rate of income tax had also artificially inflated revenues so far this year.

“Therefore we should be cautious about inferring too much good news from developments over the past few months,” Ms Crawford added.

Mr Osborne was also boosted by revisions to previous data as the ONS trimmed its estimate of last year’s deficit to £115.7m.

Following two quarters of stronger growth – as well as potential windfalls from Lloyds share sales and the Royal Mail float – the OBR should significantly lower its borrowing forecasts in November.

Investec chief economist Philip Shaw said: “Realistically it is quite possible that the stronger momentum of the economy helps the deficit to narrow faster and that borrowing dips below £100bn this year.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks