The economic recovery is still failing to cut the government’s huge budget deficit, with analysts yesterday suggesting that chancellor George Osborne might not be on course to reach his own fiscal targets.
The UK borrowed £11.37bn excluding one-off interventions in June, barely less than in the same month last year. In June 2013, public borrowing was running at £11.48bn, showing barely any reduction over the 12 months.
“The overall performance for April-June has clearly not been the start to fiscal year 2014-15 that George Osborne would have been looking for. One-quarter of the way into the tax year, it looks like the chancellor faces a battle to achieve his fiscal targets for 2014-15 and he will certainly need growth to hold up,” said Howard Archer of IHS Global Insight.
Total revenues actually fell by £1.9bn during the same period, down to £44.13bn in June. The change was driven largely by a major transfer from the Bank of England’s quantitative easing (QE) programme, which came in June last year, but was not repeated in 2013.
The tax take rose to £33.43bn in the same month, a boost of 4.8 per cent in comparison to last year. Stamp duty revenues have surged during the period, rising by 43 per cent during the same period, on the back of the recovery in the housing market.
“Deficit hawks within government will be hoping that the seasonal boost to receipts usually seen in July is revealed to be especially strong at the next data release. Otherwise, at that point questions on the credibility of the target may just start to become slightly more frequent,” said Sam Hill of RBC Capital Markets.
The Confederation of British Industry (CBI) also released bullish figures on manufacturing yesterday, indicating the strongest growth in domestic orders since 1988 during the three months to July. Analysts expressed concern that the sector might have slowed after poor industrial output figures in May, but the survey suggests the recovery is ongoing.