Bad news for George Osborne: Surprise as deficit rises despite UK's growth momentum

Rare July deficit raises doubts about the Coalition's progress in tackling the black hole in Britain's finances

The City was caught off guard today as a surprise July deficit kept the Treasury waiting for a significant boost to public finances from a flowering economic recovery.

Underlying public borrowing stood at £500 million over the month, compared with an £800 million surplus posted in July 2012, according to official figures. The City consensus had been for a £2.5 billion surplus, driven by the rapidly improving economic outlook.

Rob Wood of Berenberg Bank described the figures as "disappointing" but added: "There should be better news for George Osborne in the coming months as growth significantly beats the expectations built into the fiscal forecasts".

July is normally the second-strongest month of the year for the public finances due to the timing of corporation tax payments and self-assessed income tax returns. Though total tax receipts were 3.4 per cent higher than in July 2012, government spending rose by 3.7 per cent.

Treasury sources attributed the high spending in the month to a change in the timing of payments to the health, education and overseas aid departments. They insisted that departments were sticking to their budgets and that over the course of the full year the effect of the change in the timing of outlays would be neutral.

But the trend in the public finances so far this year has disrupted George Osborne's hopes of making faster inroads into the deficit. Excluding various one-offs the borrowing for the financial year to date has been  £36.8 billion, up from £35.2 billion in the same period of 2012/13.

The ONS reported that the deficit in 2012/13 was £116.5 billion, £2 billion lower than in 2011/12. The Government is officially targeting a £120 billion deficit for 2013/14. But the Chancellor will be hoping that the gap between spending and revenues will be considerably better than that so he can claim to have reduced the deficit in cash terms every year.

But most economists are expecting the Office for Budget Responsibility to revise up its growth forecasts later this year and, consequently, to paint a healthier picture of the public finances as revenues increase, meaning there could be even better news for the Chancellor.

The figures also showed the national debt rising to £1.19 trillion, equivalent to 74.5 per cent of GBP.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Gabriel Agbonlahor, Alexis Sanchez, Alan Pardew and Graziano Pelle
footballAfter QPR draw, follow Villa vs Arsenal, Newcastle vs Hull and Swansea vs Southampton
New Articles
i100... she's just started school
News
news
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
New Articles
i100... despite rising prices
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
voices
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 General

Cover Supervisor

£75 - £90 per day + negotiable: Randstad Education Group: Are you a cover supe...

Marketing Manager - Leicestershire - £35,000

£30000 - £35000 per annum: Ashdown Group: Marketing Manager (CIM, B2B, MS Offi...

Marketing Executive (B2B and B2C) - Rugby, Warwickshire

£22000 - £25000 per annum: Ashdown Group: A highly successful organisation wit...

SEN Coordinator + Teacher (SENCO)

£1 per day: Randstad Education Leeds: Job Purpose To work closely with the he...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam