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UK misses borrowing target by £1.8bn UK misses borrowing target by £1.8bn
(about 2 hours later)
Britain borrowed more than expected in the last financial year as local councils sought to fill the gap created by deep budget cuts by dipping into their reserves and increasing debt. Britain borrowed more than expected in the last financial year as local councils sought to fill the gap created by deep budget cuts by dipping into reserves and increasing their debts.
Local authorities borrowed almost £6bn, more than £4bn higher than the previous 12 months, offsetting bumper tax receipts and a clampdown on central government spending. Local authorities borrowed £6bn, more than £4bn higher than the previous 12 months, offsetting bumper tax receipts and a clampdown on central government spending.
The figures were another blow to George Osborne’s attempts to eliminate the deficit, which hit £74bn in the 2015-16 financial year, almost £2bn more than the official forecast of £72.2bn from the Office for Budget Responsibility (OBR) in last month’s budget.The figures were another blow to George Osborne’s attempts to eliminate the deficit, which hit £74bn in the 2015-16 financial year, almost £2bn more than the official forecast of £72.2bn from the Office for Budget Responsibility (OBR) in last month’s budget.
The Office for National Statistics said public sector net borrowing excluding the bailed-out banks was £4.8bn in March, well below the £7.4bn in March 2015 and better than the consensus among City analysts of a £6bn shortfall. In February, public sector borrowing fell by just £500m to £7.1bn compared with the same month last year. In 2010 the chancellor expected the deficit to be more than two-thirds lower at £20bn. But he has since been knocked off course by the negative effects of his own austerity measures on growth, the 2012 eurozone crisis and the slowdown in China.
A renewed momentum in the last year has brought the deficit down by almost £18bn, which the Treasury said came after the lowest monthly borrowing in March for a decade.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the trend in public borrowing has improved over recent months, but the lagging nature of the public finances “suggests that they have not registered yet the impact of the recent economic slowdown”.Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the trend in public borrowing has improved over recent months, but the lagging nature of the public finances “suggests that they have not registered yet the impact of the recent economic slowdown”.
Related: Borrowing likely to be higher than last financial year, ONS figures showRelated: Borrowing likely to be higher than last financial year, ONS figures show
The Office for National Statistics said public sector net borrowing excluding the bailed-out banks was £4.8bn in March, well below the £7.4bn in March 2015 and better than the consensus among City analysts of a £6bn shortfall. In February, public sector borrowing fell by just £500m to £7.1bn compared with the same month last year.
During the year to March tax receipts grew by 5.4%, from 4.7% in February. The improvement was broad-based, with income tax receipts up 4.9%, VAT receipts up 5.2% and corporation tax receipts up 3.0%. Meanwhile, central government current expenditure rose just 0.8% year-over-year.During the year to March tax receipts grew by 5.4%, from 4.7% in February. The improvement was broad-based, with income tax receipts up 4.9%, VAT receipts up 5.2% and corporation tax receipts up 3.0%. Meanwhile, central government current expenditure rose just 0.8% year-over-year.
Tombs warned of a growing risk of a much bigger overshoot this year because the economy has slowed, with a slowdown in tax receipts likely.Tombs warned of a growing risk of a much bigger overshoot this year because the economy has slowed, with a slowdown in tax receipts likely.
“With the fiscal projections also resting on optimistic assumptions for revenues from tax avoidance measures and savings from the welfare budget, we continue to think that the chancellor will have to implement even more austerity than planned to achieve a budget surplus by 2020.”“With the fiscal projections also resting on optimistic assumptions for revenues from tax avoidance measures and savings from the welfare budget, we continue to think that the chancellor will have to implement even more austerity than planned to achieve a budget surplus by 2020.”
The UK deficit has declined by almost £18bn since last year and is expected to continue falling until 2020 when the government is forecast to create a budget surplus.
Howard Archer, chief economist at IHS Global Insight, said Osborne will “probably be pretty relieved” that a much improved March performance meant that he missed the OBR’s target by only a narrow margin.Howard Archer, chief economist at IHS Global Insight, said Osborne will “probably be pretty relieved” that a much improved March performance meant that he missed the OBR’s target by only a narrow margin.
“Furthermore, he can argue that the public finance data will be revised many times over the coming months so there is a realistic chance that the final figure will show that he achieved his targets,” said Archer.“Furthermore, he can argue that the public finance data will be revised many times over the coming months so there is a realistic chance that the final figure will show that he achieved his targets,” said Archer.
The Treasury said: “Today’s figures confirm that the record postwar deficit we inherited has been cut by almost two-thirds as a share of GDP.The Treasury said: “Today’s figures confirm that the record postwar deficit we inherited has been cut by almost two-thirds as a share of GDP.
“We are borrowing £18bn less than last year and March’s monthly borrowing was the lowest for a decade. But while the deficit is falling, the job of repairing the public finances is not done and the budget set out action to ensure that debt falls in 2016-17 and Britain is back in the black by the end of this parliament.”“We are borrowing £18bn less than last year and March’s monthly borrowing was the lowest for a decade. But while the deficit is falling, the job of repairing the public finances is not done and the budget set out action to ensure that debt falls in 2016-17 and Britain is back in the black by the end of this parliament.”
The total national debt has now hit £1,594.1bn, equivalent to 83.5% of GDP, up from about 40% before the 2008 financial crash.The total national debt has now hit £1,594.1bn, equivalent to 83.5% of GDP, up from about 40% before the 2008 financial crash.