THE UK’S public finances came in for a clobbering in July with spending rising rapidly and tax receipts falling behind, according to the latest data released by the Office for National Statistics (ONS) yesterday.
The public sector borrowed an extra £47.2bn in the first four months of the financial year, when correcting for one-off movements, much higher than last year’s figure of £35.6bn.
These figures challenge the narrative of harsh austerity, as public spending is also rising.
Excluding debt interest payments the government spent 7.3 per cent more in July 2012 than the same period a year ago. But receipts are down 0.8 per cent over the same period, and for the 12/13 fiscal year so far they are up just 1.1 per cent.
This relatively weak rise was partly due to a sharp fall in North Sea oil and gas tax revenue, as a result of a shutdown at Total’s Elgin gas field.
A Treasury spokesperson gave falling taxation income as the reason public finances were below Office for Budget Responsibility (OBR) forecasts, and stressed the impact of adverse world economic conditions.
But Ross Walker at RBS was pessimistic about the prospects for a return to forecast, predicting the government’s current debt overshoot would reach £30bn by the end of the year, extrapolating from the £11bn gap over OBR forecasts seen so far.
Nida Ali at the Item Club agreed. “It’s looking like [the OBR] will need to make some pretty hefty upward revisions to the projections for the deficit,” she said.