THE UK posted an unexpected deficit in July, the first for the month since 2010, highlighting the sluggish progress in reductions to spending.
Records of the country’s recent public finances, released yesterday, show a relatively small deficit of £62m for last month. In the same month in 2012, the treasury ran a budget surplus of £823m.
Figures are subject to revision, and last July was originally recorded as having a surplus, but the news will come as a particular disappointment for chancellor George Osborne, given robust growth in the three months to July, which the National Institute of Economic and Social Research estimates to have been 0.7 per cent.
During the same month, the Office for National Statistics (ONS) said public debt ticked up to nearly three quarters of GDP, hitting 74.5 per cent.
In the 2012-13 financial year, the ONS estimates that the UK borrowed £116.5bn, excluding the effect of one-off events like the purchase of Royal Mail’s pension programme, down only £2bn from the amount borrowed in 2011-12.
Barclays’ Blerina Urici drew attention to how the deficit in July had come about: “Tax receipts held up well, but increases in expenditure compared with last year led to public finances worsening”.
When excluding the boost from quantitative easing, revenues were 3.5 per cent higher in July than in the previous year, reaching £54.1bn. Spending rose faster over the 12 months, up four per cent.
Martin Beck of Capital Economics added: “while signs of economic recovery should eventually feed through into an improvement in the public finances, it looks like the chancellor will have to wait a while yet”.
Berenberg Bank gave a rosy interpretation of the figures, highlighting that the official March prediction for growth in the third quarter of this year was only 0.2 per cent, but is now expected to be much higher, and should begin to translate into increased tax revenues.