PSBR `on course to hit target'

The Government insisted yesterday that its borrowing plans were on course to meet the Budget target despite a bigger-than-expected gap between spending and revenues last month, and the embarrassing admission that the Treasury had miscalculated by pounds 400m the amount Budget increases in air passenger duty and insurance premium tax would raise next year.

The financial markets shrugged off the disappointing figures. Shares in London set another record, passing the 4,200 barrier, and the pound jumped more than two pfennigs to its highest level since Black Wednesday.

The Treasury said the revision to the tax estimates applied only to 1997/98, and made no difference to the medium-term policy. Although it would not spell out the explanation, analysts said the timing suggested officials had calculated the yield on the increase in air passenger duty from April, when it comes into effect only in November.

The increase from pounds 5 to pounds 10 for European flights and from pounds 10 to pounds 20 for other flights is now expected to bring in only pounds 500m, rather than pounds 800m, while higher insurance premium tax is expected to yield pounds 1.1bn rather than pounds 1.2bn.

The pounds 400m shortfall represents a small fraction of total government revenues of around pounds 260bn a year. But the low-key announcement contrasted with the Chancellor's insistence on clawing back the pounds 1bn that higher VAT on domestic light and heat should have raised when he was defeated on this measure after the 1994 Budget.

The Public Sector Borrowing Requirement was pounds 2.1bn in December, compared with pounds 0.6bn in the same month a year earlier. The figure was higher than expected mainly because of a cluster of government interest payments on "strippable" gilts. The introduction of gilts whose coupon payments can be "stripped" is giving debt interest payments a strong seasonal pattern. The PSBR, excluding privatisation proceeds, stands at pounds 20.4bn so far this year, well down from pounds 23.6bn at the same stage last year. Government spending grew 3 per cent in the year to December.

Receipts grew faster than predicted. Although VAT receipts last month were 10 per cent down on a year earlier, corporation tax revenues were 30 per cent higher.

Analysts said the PSBR was on track to hit the Budget target of pounds 26.4bn. "We believe the Treasury was deliberately cautious in its PSBR forecast for the current financial year," said David Walton at Goldman Sachs. The crucial months for the full-year total will be January and March. The former is one of the most important months for corporation tax. And departmental spending could display a traditional year-end surge.

The FTSE 100 index rose just over 10 points to end at 4,207.7. A surge in the US dollar thanks to favourable trade figures helped the pound rise more than two pfennigs to close at DM2.6890, its highest since the ERM crisis.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree Group have been well es...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000 : SThree: Recruitment is a sales role ...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'