UK borrowing falls as country slide deeper into debt
UK Government borrowing fell sharply in July, although the country continued to sink further into debt.
19 Aug 2010
The Government borrowed £3.8bn over the month, down from £14.7bn in June, £18.4bn in May and 6.1bn in July last year, according to figures from the Office for National Statistics (ONS).
It brings public borrowing for the four months of the financial year to £44.9bn. The figures exclude the impact of financial rescues, which reduce overall borrowing due to profit contributions from the part-nationalised banks.
A near 40pc rise in corporation tax receipts on the same month last year was behind the strong performance.
Economists called the figures encouraging, but Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club said: “One swallow does not make a summer and one set of better figures should not distract from the mammoth task facing the Chancellor.”
The Treasury also cautioned against reading too much into the strong receipts growth and said figures were in line with the Office for Budget Responsibility’s full fiscal year forecast.
The independent Office for Budget Responsibility is expecting borrowing of £149bn for the financial year as a whole – down from £155bn in 2009-10.
However, debt as a percentage of GDP is still at record highs. Including bank bail-outs, net debt rose to 63.7pc of GDP, or £927.4bn. Stripping it out debt is 56.1pc of GDP or £816.2bn.
The current deficit fell to £500m in July from £3.3bn in the same month last year.
While the narrowing of the deficit was welcomed by economists, they pointed out that high tax receipts in July usually leave the Government with a surplus and before last year it was almost unheard of to run a deficit during the month.
The latest data comes as Chancellor George Osborne warned this week of the danger of not sorting out the public finances amid discontent over the savage cuts planned in June’s emergency Budget.
Last week the Bank of England downgraded forecasts for growth and said inflation would be above target throughout 2011 because of plans to increase VAT to 20pc next January.