Public sector borrowing higher than expected in May
The news casts doubt on the govt's ability to meet its deficit target of £92bn for 2012/13
By CFOWorld staff | CFO UK | Published 10:50, 26 June 12
Public sector net borrowing was higher than expected in May, casting doubt over the government's ability to meet its deficit target of £92 billion in the 2012/13 fiscal year.
Income tax receipts fell and spending rose pushing up borrowing last month, official figures showed on Tuesday, suggesting the government may struggle to meet its debt reduction target.
The Office for National Statistics (ONS) said that public sector net borrowing excluding public sector interventions - the government's preferred measure - came in at £17.943 billion last month, up from £15.195 billion last May.
This was above economists' forecasts for £14.8 billion and took borrowing in the fiscal year to date to £356 million, compared with £24.470 billion a year ago.
The cumulative figure was flattered by a one-off transfer of assets from the pensions fund of the state-owned postal service in April. Without this effect, borrowing would have been £28.4 billion pounds in April and May combined.
In addition, the ONS revised up borrowing in 2011/12 to £127.6 billion from £124.4 billion. Tuesday's figures cast doubt over the government's ability to meet its deficit target of £92 billion in the 2012/13 fiscal year, which includes the asset-transfer effect.
The economy is facing its second recession in four years, and uncertainty about the knock-on effects of the euro zone debt crisis have already forced the coalition government to admit it will take two years longer to eliminate its budget deficit than it envisaged when it came to power in 2010.
So far, markets have given the Conservative-led government the benefit of the doubt, but analysts reckon that a darker economic outlook will make it hard for the government to meet its deficit reduction targets this year and next.
Official data on Thursday is expected to confirm the economy shrank by 0.3 percent in the first three months of 2012.
Private sector forecasts published by the Treasury last week, show economists reckon the government's budget deficit will come in at £95.7 billion in the current 20 12/13 fiscal year, almost £3 billion higher than forecast by the Office for Budget Responsibility.
Tuesday's figures could now push those expectations higher. The government is also seen overshooting its deficit target by more than £7 billion in 2013/14 due to a much weaker growth outlook.
Tuesday's data showed that income tax receipts fell by 7.3 percent on the year in May, while government spending rose by 7.9 percent.
Total public sector net debt, excluding financial sector interventions, rose to £1.013 trillion. That was equivalent to 65 percent of gross domestic produce, a record for the month of May and the third-highest on record since the series began in 1993.
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