Tobacco duty knocks the fire out of the PSBR

A MASSIVE jump in receipts of tobacco duty helped to ensure that the Government had to borrow much less last month than the City expected to meet the shortfall between its spending and tax revenue, writes Robert Chote.

The public sector borrowing requirement in December was pounds 2.1bn, a third lower than in the same month a year earlier. This was the biggest fall in the PSBR over a year since the end of 1990.

The PSBR for the first nine months of 1993/4 totalled pounds 32bn, up from pounds 25.3bn in the same period last year. City economists said the Treasury was on course for a PSBR for the financial year as a whole just under its pounds 50bn Budget forecast.

Tax receipts were pounds 153.1bn in the first nine months of the year, up 4 per cent from the same period of 1992/3. December tobacco duty receipts were pounds 1.3bn higher than a year earlier at pounds 1.8bn as retailers rushed to buy stock ahead of the Budget, which they guessed correctly would bring a rise in duty.

Another factor flattering the PSBR was a pounds 500m net repayment by local authorities, the only such repayment for a December in the past 10 years.

The Central Statistical Office and the Treasury said many local authorities had higher receipts from sales of their capital stock - for example land and council houses - because the temporary relaxation of rules prohibiting the spending of such receipts halted at the end of the year.