Government posts surprise deficit

George Osborne suffered another blow in his bid to get the public finances under control after the government posted a surprise deficit in July.

George Osborne suffered another blow in his bid to get the public finances under control after the government posted a surprise deficit in July.

First published in Business News The Northern Echo: Photograph of the Author by

GOVERNMENT finances are still in worse shape than they were a year ago showing the scale of the task facing the Chancellor as he tries to meet his fiscal target.

Borrowing of £764m in July - which excludes the effects of bank bail-outs and the Bank of England's quantitative easing (QE) asset purchase scheme - compares to a figure of £1.573bn in the same month last year.

The improvement appears to be a step in the direction of the 10 per cent reduction in the annual deficit, targeted by the independent Office for Budget Responsibility (OBR).

But year-to-date underlying borrowing from April to June, at £37bn, is still 5.1 per cent worse than it was at the same stage in 2013, according to the figures published by the Office for National Statistics (ONS).

July's figure also looks disappointing compared to the performance for the month in the years prior to last, when public finances had shown a surplus.

But Samuel Tombs of Capital Economics said the figures "show that the fiscal consolidation might still be on track despite the excessive borrowing seen in the first three months of the fiscal year".

"July's small deficit brings the running total of borrowing this year a little closer to the 10 per cent annual reduction required to meet the OBR's full year forecast.

"Accordingly, the Chancellor may yet be spared the difficult decision of announcing further slippage of the fiscal plans or extra austerity before next May's general election."

A Treasury spokesman said the figures remained in line with forecasts for the deficit as a percentage of gross domestic product (GDP) to be halved by the end of the current fiscal year compared with when the Coalition came to power.

A surplus is expected to be "back loaded" to January 2015 due to strong growth in self-assessed tax revenues for 2013/14, with taxpayers shifting income declarations from the 2012/13 period to take advantage of a cut in the tax rate.

But Chris Leslie, shadow chief secretary to the Treasury, said the Chancellor was on course to break his promise on balancing the books by next year.

Comments

Comments are closed on this article.

Send us your news, pictures and videos

Most read stories

Local Info

Enter your postcode, town or place name

About cookies

We want you to enjoy your visit to our website. That's why we use cookies to enhance your experience. By staying on our website you agree to our use of cookies. Find out more about the cookies we use.

I agree