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| UK budget deficit narrows after boost from taxes and duties | UK budget deficit narrows after boost from taxes and duties |
| (about 4 hours later) | |
| A sharp fall in Whitehall spending and lower interest bills on government debt helped narrow Britain’s public sector budget deficit in April. | A sharp fall in Whitehall spending and lower interest bills on government debt helped narrow Britain’s public sector budget deficit in April. |
| A steady rise in tax receipts in the first month of the financial year also played a part following a record-breaking VAT haul, a bumper rise in corporation tax receipts and the rebound in stamp duty on property sales. | A steady rise in tax receipts in the first month of the financial year also played a part following a record-breaking VAT haul, a bumper rise in corporation tax receipts and the rebound in stamp duty on property sales. |
| However, Whitehall budgets were flattered by a reduction in council funding that is likely to prove temporary, leading analysts to warn that achieving a balanced budget within five years would be difficult without further cuts in government spending. | |
| Related: UK public borrowing fall: four reasons not to gloat | Related: UK public borrowing fall: four reasons not to gloat |
| Samuel Tombs, senior UK economist at Capital Economics, said George Osborne would struggle to justify tax cuts in his July budget without a further attack on public services and welfare payments. | Samuel Tombs, senior UK economist at Capital Economics, said George Osborne would struggle to justify tax cuts in his July budget without a further attack on public services and welfare payments. |
| He said: “While April’s figures bring more good news on the current health of the UK’s public finances, a major and painful reintensification of the fiscal squeeze will still be required for the government to obtain an overall budget surplus in this parliament. | He said: “While April’s figures bring more good news on the current health of the UK’s public finances, a major and painful reintensification of the fiscal squeeze will still be required for the government to obtain an overall budget surplus in this parliament. |
| “It is highly unlikely that this pace of spending cuts can be maintained in future months. | “It is highly unlikely that this pace of spending cuts can be maintained in future months. |
| “Accordingly, the chancellor is unlikely to have spare funds to dispense at the summer budget on 8 July, and any steps towards the Conservatives’ unfunded manifesto tax and spending commitments will require extra revenue-raising measures or deeper cuts to other departments’ budgets than already planned by the coalition.” | “Accordingly, the chancellor is unlikely to have spare funds to dispense at the summer budget on 8 July, and any steps towards the Conservatives’ unfunded manifesto tax and spending commitments will require extra revenue-raising measures or deeper cuts to other departments’ budgets than already planned by the coalition.” |
| The Treasury said that the deficit, at just under 5%, is still one of the highest in the developed world. “There is no shortcut to fixing the public finances so we have to continue with the hard work of identifying savings and making reforms necessary to finish the job and build a resilient economy,” a spokeswoman said. | The Treasury said that the deficit, at just under 5%, is still one of the highest in the developed world. “There is no shortcut to fixing the public finances so we have to continue with the hard work of identifying savings and making reforms necessary to finish the job and build a resilient economy,” a spokeswoman said. |
| The Office for National Statistics said public sector net borrowing, excluding state-controlled banks, totalled £6.8bn in April, down nearly 27% from a year earlier and the lowest for that month since 2008. | The Office for National Statistics said public sector net borrowing, excluding state-controlled banks, totalled £6.8bn in April, down nearly 27% from a year earlier and the lowest for that month since 2008. |
| The public coffers were swelled by the highest VAT haul for April since records began in the 1997-98 financial year, coupled with a jump in income tax receipts to £11.6bn and the highest corporation tax revenues for the month since 2008. | The public coffers were swelled by the highest VAT haul for April since records began in the 1997-98 financial year, coupled with a jump in income tax receipts to £11.6bn and the highest corporation tax revenues for the month since 2008. |
| Only a mistake by the BBC, which failed to disclose an expected £200m from TV licence receipts, kept the average growth figure for tax receipts from breaking through the 3% barrier. A £200m reduction in receipts from the Bank of England’s APS scheme, which insures the Royal Bank of Scotland against losses on £250bn of its loan book, also helped reduce the average rise in tax receipts to 2.7%. | Only a mistake by the BBC, which failed to disclose an expected £200m from TV licence receipts, kept the average growth figure for tax receipts from breaking through the 3% barrier. A £200m reduction in receipts from the Bank of England’s APS scheme, which insures the Royal Bank of Scotland against losses on £250bn of its loan book, also helped reduce the average rise in tax receipts to 2.7%. |
| But the deficit mainly fell after a £4.7bn cut in Whitehall spending, including a one-off £4.3bn cut in local government grants, which was partly offset by a £1.9bn rise in capital spending. | |
| A near 7% reduction in interest payments also helped squeeze the deficit as Britain’s ultra-low inflation reduced the government’s bill on inflation-linked bonds. | A near 7% reduction in interest payments also helped squeeze the deficit as Britain’s ultra-low inflation reduced the government’s bill on inflation-linked bonds. |
| Osborne aims to wipe out the deficit by 2018-19 after failing to eliminate it by 2015, as was agreed by the Conservatives and Liberal Democrats at the outset of their coalition government in 2010. | Osborne aims to wipe out the deficit by 2018-19 after failing to eliminate it by 2015, as was agreed by the Conservatives and Liberal Democrats at the outset of their coalition government in 2010. |
| Revised figures published by the ONS showed borrowing in the 2014-15 tax year totalled £87.7bn, compared with an earlier estimate of £87.3bn and a government goal of no more than £90.2bn. In March, Osborne said he wanted to reduce borrowing to £75.3bn this financial year, equivalent to 4.0% of GDP. | Revised figures published by the ONS showed borrowing in the 2014-15 tax year totalled £87.7bn, compared with an earlier estimate of £87.3bn and a government goal of no more than £90.2bn. In March, Osborne said he wanted to reduce borrowing to £75.3bn this financial year, equivalent to 4.0% of GDP. |
| The TUC general secretary, Frances O’Grady, said last year’s figures showed the chancellor borrowed an extra £50bn “to bail out his failed economic plan”. | The TUC general secretary, Frances O’Grady, said last year’s figures showed the chancellor borrowed an extra £50bn “to bail out his failed economic plan”. |
| She said: “The failure to get wages growing has left the public finances in a mess, with income tax revenues and national insurance receipts falling £33bn short of expectations for the last year alone. | She said: “The failure to get wages growing has left the public finances in a mess, with income tax revenues and national insurance receipts falling £33bn short of expectations for the last year alone. |
| “The extreme cuts the chancellor is planning for his July budget will put our weak recovery at further risk, and leave our schools, hospitals and other services without the vital revenues they need. We need a better plan based on investment in skills, infrastructure and innovation to create good jobs with decent wages.” | “The extreme cuts the chancellor is planning for his July budget will put our weak recovery at further risk, and leave our schools, hospitals and other services without the vital revenues they need. We need a better plan based on investment in skills, infrastructure and innovation to create good jobs with decent wages.” |
| David Kern, chief economist at the British Chambers of Commerce, said it was too early to identify trends in this financial year from the April figures but said we could well see further reductions in the months ahead. | David Kern, chief economist at the British Chambers of Commerce, said it was too early to identify trends in this financial year from the April figures but said we could well see further reductions in the months ahead. |
| “However, we must not dismiss the huge challenge the government still faces to reduce the deficit and stabilise public finances. Britain’s financial sector was hit hard during the recession and, together with lower oil and gas output, the UK’s ability to generate tax revenues is constrained,” he said. | “However, we must not dismiss the huge challenge the government still faces to reduce the deficit and stabilise public finances. Britain’s financial sector was hit hard during the recession and, together with lower oil and gas output, the UK’s ability to generate tax revenues is constrained,” he said. |