George Osborne, the new Chancellor, received an unexpected windfall yesterday with the Office for National Statistics reporting that total government borrowing last year was £7bn lower than had previously been thought.
The ONS said that higher-than-expected tax receipts for March meant the deficit that month was £5.5bn below its initial deficit. April's borrowing came in at £10bn, the worst ever figure for the month, but still £1bn below its forecast. Adding in other revisions, total borrowing for the 2009/10 financial year was £156bn, markedly below the £163bn previously announced.
The revisions will intensify the debate over whether government spending really does have to be cut by £6bn immediately, as Mr Osborne insists. The TUC said the data suggested that borrowing was "far from out of control". Brendan Barber, its general secretary, said: "With the economy still fragile, the new Government would be wrong to put this at risk by introducing spending cuts now."
However, economists warned against complacency. While April's figures suggest that the deterioration in the public finances is at last slowing, the data also included some worrying detail. In particular, there was no real increase in the tax take in April, despite the introduction of the new 50p higher rate of income tax. The Treasury is forecasting a 6.5 per cent increase in revenue for this year.
Jonathan Loynes, of Capital Economics, said: "This rather puts all the pre-election bickering about the Conservative' proposed £6bn cuts into context, but it does not mean that a major fiscal tightening is no longer needed."
Mr Osborne is due, on Monday, to unveil details of the £6bn of cuts he believes he can make now, and will lay out further plans for spending reductions and tax rises in an emergency Budget on 22 June.Reuse content