PSBR heads towards pounds 3bn overshoot

DIANE COYLE

Economics Editor

Government borrowing is likely to be pounds 2bn to pounds 3bn over target this financial year, limiting Chancellor Kenneth Clarke's scope for tax cuts in the next budget.

The most serious slippage in the public sector finances is alarmingly slow growth in government revenues. Tax receipts are likely to be up to pounds 2bn lower than forecast at the time of last November's budget - and pounds 7bn lower than the level predicted in the previous budget.

Spending by Whitehall is also running ahead of plans and could overshoot by about pounds 1bn, unless some expenditure can be clawed back successfully this month. This could be difficult in a month when departments have usually rushed to spend as much as possible before the year-end.

Andrew Smith, shadow Chief Secretary to the Treasury, said: ``Public borrowing is still running at a very high level, reflecting weakness rather than strength in the economy.''

The Treasury said borrowing remained on a downward trend, a conclusion backed by most City analysts. ``There is now some clear improvement in the public finances this year compared to last,'' said Simon Briscoe at Nikko Europe.

However, many thought future borrowing would also overshoot the Budget plans, thanks to tax cuts announced last November taking effect and the 4 per cent pay awards in the public sector. Kevin Darlington at Hoare Govett said borrowing would continue to shrink but would remain above the Maastricht ceiling of 3 per cent of GDP.

The gap between government revenues and spending was pounds 3bn in February, the last but one month of the financial year. It would have been higher, except for an unexpected pounds 1.5bn in privatisation receipts from BAA shares, electricity company bonds and the second part of the Genco2 sale.

Revenues have increased 9 per cent this financial year, compared to a Budget forecast of 9.6 per cent for the full year. Lower inflation has led to slower revenue growth. VAT receipts account for much of the shortfall, possibly due to lower spending on consumer goods liable for VAT.

Spending was up 4.3 per cent in the 11 months to February, above the Budget forecast of 3.8 per cent for the year as a whole.

Debt interest payments have been higher than expected, at pounds 21.5bn since last April compared to pounds 19.1bn at the same stage last financial year. Local authorities are also likely to be in the red. They made a monthly debt repayment of pounds 757m in February, and have repaid pounds 0.5bn in 11 months. However, they have borrowed pounds 1.6bn on average every March to use up the remainder of their annual budget. If the pattern is normal this year, they are unlikely to meet the target of a pounds 0.1bn debt repayment for the full year.

Economists said that on last month's trends, the full-year Public Sector Borrowing Requirement (PSBR) would be pounds 31-32bn, compared with a target of pounds 29bn set in the November budget. This is much smaller than the Treasury's average pounds 10bn error in forecasting the next year's PSBR.

PROMOTED VIDEO
News
Teeth should be brushed twice a day to prevent tooth decay
education
News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
Sport
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
News
Those who were encouraged to walk in a happy manner remembered less negative words
science
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
News
Renee Zellweger as Bridget Jones
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London