Public sector borrowing: Higher tax receipts helped shrink the budget deficit in April

Jessica Morris
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Chancellor George Osborne received an unexpected boost (Source: Getty)

Chancellor George Osborne was given a boost today, as higher tax receipts helped shrink the deficit by more than expected in April.

Public sector net borrowing excluding state-controlled banks fell by about 27 per cent to in the year to April, reaching £6.8bn, below economists' forecasts of £8.1bn, and its lowest level for that month since 2008.

Income tax revenues also rose to £11.6bn, the highest level for April in two years, as a stronger economic recovery began to translate into more tax receipts.

The government has pledged to make £12bn in welfare cuts over the next five years - and yet only £2bn has been identified, according to the Institute for Fiscal Studies.

Chancellor George Osborne recently said he will be delivering a new budget "for working people" on 8 July, with commentators eager to find out where the axe will fall.

But commentators have expressed skepticism over whether it will be able to achieve these ambitious targets.

Howard Archer, chief economist at IHS, said:

Despite April’s improved performance, ahead of the extra budget called for 8 July, major questions remain over the new Conservative government’s ability to meet its ambitious fiscal targets over the longer term.

Public sector net debt, excluding state-controlled banks, totalled £1.488 trillion in April, equivalent to 80.4 per cent of gross domestic product.

Business groups applauded the reduction, saying it could precede further reductions in the months ahead - but they also flagged a number of challenges such as boosting investment to encourage growth.

David Kern, chief economist at the British Chambers of Commerce, said:

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.

The government must place as much emphasis on creating growth as it does on reducing public sector spending. Only then will the UK have a vibrant economy which is able to generate wealth over the long term and deliver the tax revenues to help cut the deficit

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