Data corrections to deficit figures offer hope for Osborne

Julian Harris
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DOWNWARD revisions to government deficit figures for November, and a fall in the deficit for December, will reassure chancellor George Osborne that he is on course to hit his targets for the financial year.

Government borrowing dropped to £16.8bn in December, it was revealed yesterday, considerably below the forecasts of economists who expected a figure closer to £20bn.

And public sector net borrowing (PSNB) for November was revised down by £2.2bn, to £21.1bn.

“If current trends are replicated over the whole fiscal year the deficit would come in around £146bn, meaning that chancellor Osborne would modestly undershoot his target of £149bn,” said Howard Archer of IHS Global Insight.

The figures suggested that government finances might be gradually coming under control; December’s PSNB was down by £4.2bn against the same time in 2009.

Excluding financial interventions, the deficit for the financial year up to December is £118.4bn, down from £126.8bn in the final year of the Labour administration.

However, government borrowing levels are “still hefty,” Archer said.

In November the Office for Budget Responsibility (OBR) slightly reduced its forecast for the year’s deficit to £148.5bn, on the back of improved economic data.

“This should at least provide the Treasury with a crumb of comfort on a very difficult day,” commented Nida Ali of the Ernst and Young Item club.

“November’s surge in government spending appears to have been a one-off,” she said.

Government revenues were boosted by a year on year increase in VAT receipts of nearly nine per cent. Even allowing for the VAT rise, this “suggests greater consumer activity in December than other sources have reported,” Ali added.

Yesterday also marked the first time that the government’s investment in banking groups RBS and Lloyds TSB were included in the data.