GOVERNMENT borrowing jumped in April as spending increased unexpectedly, official figures showed yesterday, although the takeover of the Royal Mail pension fund’s assets skewed the data in the month.
The Office for National Statistics (ONS) officially recorded a budget surplus of £16.5bn in April, compared with a deficit of £16.9bn in March and £9.06bn in April 2011.
However, when the £28bn shift of Royal Mail pension assets is removed from the calculation it reveals an £11.5bn deficit, including a £12.4bn deficit in the current budget.
Economists warned the gain in headline figures disguised longer-term costs from taking on the pension fund’s liabilities.
“The current value of those liabilities is £10bn higher than the assets, so in any holistic assessment of the government’s accounts this can hardly be thought of as a bonus,” said BNP Paribas economist David Tinsley.
“Perhaps more worrying, the underlying picture this month looks a little soft. Given the monthly volatility in the data there is plenty of time for that to come right. But it is well to remember that the government is still relatively only just into a long period of austerity.
“It needs to keep its eye on the ball if it is to keep delivering on spending targets that will become progressively harder to deliver as the low-hanging fruit have been picked.”
Current spending rose from £54.15bn in April 2011 to £56.24bn last month, made up of a £424m rise in interest payments, a £790m jump in the benefits bill and an £896m increase in other spending.
Meanwhile current receipts only rose £548m on the year from £42.38bn in April 2011 to £42.93bn this year.
The ONS revised the previous month’s data, showing annual borrowing for the financial year 2011-12 was actually £1.6bn lower than initially thought.
“This is mainly because of an upward revision to receipts of income tax and national insurance contributions and slightly lower spending on net social benefits, partially offset by higher net investment spending,” explained the Institute for Fiscal Studies.