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Budget deficit reaches record high in February


ONS cites decrease in income tax receipts and rise in government spending

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Budget deficit hit a record high in February, dealing a blow to chancellor George Osborne (pictured) before his Budget speech.

An Office for National Statistics report released on Wednesday showed that income tax receipts dived and spending climbed.

Public sector net borrowing excluding public sector interventions - the government's preferred measure - hit a record for the month of February, the ONS said. It jumped to £15.18 billion last month to from £8.87 billion in February 2011.

This was almost twice the average forecast in a Reuters poll of £8 billion.

"This figure is completely out of the blue. It provides an uncomfortable background for the budget," Philip Shaw, economist at Investec, told Reuters.

Wednesday's data showed the government remains just about on track to undershoot its borrowing target of £127 billion this fiscal year. Borrowing so far in 2011/12 came in at £109.957 billion, down from £118.890 billion in 2010/11.

"The government is making progress in cutting the deficit this year," said a Treasury spokesman, adding that departmental spending was always expected to be higher at the end of the fiscal year.

And Osborne is expected to reveal later that government borrowing will fall below £100 billion in the 2012/13 fiscal year for the first time since 2008/09, thanks to a one-off windfall of £28 billion from a transfer of assets from the Royal Mail pension fund.

The ONS said February's jump in borrowing was driven by a 2.7 percent drop in tax receipts on the year, while government spending climbed 8 percent.

Income tax alone slumped 12.4 percent on the year in February, while benefit payments climbed 11.2 percent. The ONS said government departments tended to backload their spending, but that had been more marked in February than last year.

The broader public sector net borrowing measure -- which includes the cost of bailing out the UK banks, as well as some revenues from the sector -- rose to £12.9 billion in February, up from £6.06 billion in February 2011.

The total public sector net debt, excluding financial sector interventions, rose to £995 billion or 63.1 percent of GDP in February, also a record for the month. Including the cost of bank support, it fell to 137.9 percent of GDP.

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Budget deficit reaches record high in February
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