Borrowing at a record high
GOVERNMENT borrowing climbed to a record high in June, highlighting the severity of the task facing the coalition government.
The public sector net cash requirement (PSNCR) was £20.9bn last month, more than had been forecast and the highest since records began in 1984. Analysts had expected a fall to around £15bn. The public sector net borrowing requirement was £14.5bn, slightly lower than the £14.7bn seen in June 2009.
Public sector net borrowing excluding financial sector interventions was £15.2bn. Extrapolating this forward points to a full-year deficit of about £152bn, according to Capital Economics’ Jonathan Loynes. This is about £3bn above the Office for Budget Responsibility (OBR) Budget forecast.
Loynes added: “It does perhaps dampen hopes that the public finances might improve more quickly than the OBR has predicted over the coming months.”
The annual improvement in tax receipts slowed markedly in June to just four per cent this month compared to 7.6 per cent last month.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said: “The strong year-on-year growth in tax receipts that we saw in the early months of the year seems to have cooled.”
He added: “There are clear signs in these figures that the brakes are being applied to government spending, but the debt interest bill is more than double that of last June and this is only likely to increase in the coming months given current levels of borrowing.”
A lack of fiscal control could still put Britain’s triple-A rating at risk.