Relief for George Osborne as borrowing drops by nearly £7bn
Saturday 20 October 2012
George Osborne's chances of avoiding a mauling from his own independent fiscal watchdog in December rose yesterday after some surprise good news on the UK's borrowing burden during September.
The Office for National Statistics said that the nation had borrowed £6.7bn less than previously thought since April after revisions to earlier data. September's deficit was £12.8bn, £700m below the same month last year and much better than some of the City's more pessimistic forecasts.
Although borrowing for the first six months of the financial year is still £4.9bn ahead of last year at £67.4bn, this is still an improvement on the £13bn overshoot estimated in July.
To meet the independent Office for Budget Responsibility's borrowing forecasts, the Chancellor still has to cut the deficit from £126bn to £120bn this year. He could still miss the target, but by a much narrower margin than feared.
Investec's chief economist, Philip Shaw, added: "The Chancellor does at least look as if he will be able to avoid delivering his autumn statement against a background where the public finances are on a path of straight-line deterioration. With the economy in a continued state of fragility, we feel he is very unlikely to impose further ,short-term budgetary savings and the relief offered by the recent data should help him to argue his case."
Mr Osborne will have been encouraged by a 3.7 per cent rise in tax receipts last month as stronger growth – likely to be confirmed in next week's GDP estimates for the July-September quarter – boosts the Treasury's coffers.
Royal Bank of Scotland economist Ross Walker said: "This should assuage some of the recent concerns about the extent of the underlying deterioration in the UK public finances."
The figures also showed net debt hitting £1.07trn in September, equivalent to 67.9 per cent of the economy.
The Chancellor has pledged to put debt as a share of the economy on a downward path by the end of the current parliament in 2015, although the UK's spluttering growth performance puts him in danger of breaching this target.
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