Treasury borrowing exceeds expectations

The Government borrowed pounds 2.7bn last month to bridge the gap between its spending and tax revenue. This was slightly more than City forecasts, reinforcing expectations that the Chancellor will raise an extra pounds 2bn- pounds 3bn in the Budget later this month.

October borrowing was nearly half as high again as in the same month last year, according to Treasury figures. The public sector borrowing requirement for the first seven months of the financial year totalled pounds 26.9bn, some 35 per cent up on last year.

The Treasury said the PSBR was still on track to meet the Budget forecast of pounds 50bn for the year as a whole, although most City economists expect it to come in slightly below this figure.

The PSBR was slightly higher than expected in October because revenues were surprisingly low. Cash receipts in the first seven months of the financial year were 3 per cent higher than in the same period of 1992 at pounds 116.6bn, but receipts in October alone were 1.6 per cent down on last year at pounds 18bn.

Ian Shepherdson, of Midland Global Markets, said this was largely the result of a sharp drop since October last year in corporation tax proceeds. But he added that these revenues were 'extremely erratic' and that a month's data were 'no reason to worry unduly'. VAT revenue, in contrast, was much more buoyant than expected.

Net departmental spending was well down on last year in October at pounds 21.3bn, but only because of a pounds 5.1bn grant to local authorities a year ago. Net spending so far this financial year is 2.5 per cent up on 1992-93 at pounds 138.5bn.

Spending is running below the Treasury's forecast this year, but Michael Saunders, of Salomon Brothers, expects it to catch up. He said the PSBR was likely to be pounds 49bn- pounds 49.5bn for the full year.