A budget deficit of £17.9bn for May pushed the net national debt to £1.013 trillion, hitting 65 per cent of GDP. Just one year ago, net debt stood at the comparatively low figure of £921.3bn, representing 61.3 per cent of GDP.
These headline figures ignore the cost of bailing out the banks, and other off balance sheet items the exchequer is liable for, such as projects under the private finance initiative and pensions payments.
A spokesman for HM Treasury argued that “it is too early in the financial year to draw conclusions, especially as today’s data include a number of one-off factors and temporary distortions”. The Treasury points to the possibility of revisions, especially since this month marks the transition from COINS to OSCAR, a new public spending system.
Early tax credit payments due to the extra bank holiday, and an early payment of the Department of Health’s social grant are also given as explanations. As a result, the Treasury expects this jump in May to be largely balanced out by lower-than-expected increases in June.
Current expenditure rose to roughly £55bn in May, which represents a jump of 7.9 per cent on the year. However the growth is a more modest 3.7 per cent considering the change for April and May together.
Tax takings rose, at a rate of 1.6 per cent, to £38.6bn from just over £38bn last year. A fall in receipts from income and capital gains taxes by 7.3 per cent was partly compensated by an increase of 4.9 per cent in VAT receipts, as well as gains elsewhere.
Nida Ali at Ernst & Young described the figures as “very discouraging”, especially the rapid increase in government spending, and warned that “the government needs to find around £11bn of savings over the next ten months” if it is to hit the Office for Budget Responsibility (OBR) forecast.