Public sector borrowing falls by £15bn

21 Apr 11
Total public sector borrowing fell to £141.1bn in the past financial year, according to the Office for National Statistics.

By Richard Johnstone

21 April 2011

Total public sector borrowing fell to £141.1bn in the past financial year, according to the Office for National Statistics.

The latest figures, published today, also show that net borrowing in the month of March was £18.6bn, excluding the temporary effects of the government’s financial rescue of the banks.

The total net borrowing figure is almost £4.8bn below the Office for Budget Responsibility’s latest forecast of £145.9bn. It is also £15.4bn less than 2009/10’s total, which stood at £156.5bn.

Borrowing in March was £1.2bn lower than a year ago but higher than February’s £11.8bn, a record for the month.

At the end of 2010/11, the nation’s net debt, excluding what the ONS calls ‘the temporary effects of financial interventions’ in the banking sector, was £903.4bn, equivalent to 59.9% of gross domestic product. This represents the highest proportion of debt to GDP ratio in the past decade, and is up from £760.3bn (52.8% of GDP) at the end of the year to March 2010.

Including the government’s interventions in the banks, the debt totals £2,238.6bn, equivalent to 148.5% of GDP.

The figures also show that local government borrowing for the financial year was £4.9bn, a £2bn increase on the year before.

Government income from taxes in 2010/11 rose to £508.9bn, up from £476bn in 2009/10. This was due to an increase of more than £20bn from taxes on production, and £11.5bn extra from taxes on income.

The Office for Budget Responsibility said the lower-than-projected borrowing was due in part to public corporations borrowing £4bn less than forecast. Central government spending was also £2bn below expectations.

Commenting on the figures, Rowena Crawford, a research economist at the Institute for Fiscal Studies, said: ‘Chancellor George Osborne will doubtless be pleased that he looks to have borrowed £4.8bn less last year than the Office for Budget Responsibility predicted a month ago. This reflects lower-than-expected borrowing by central government and public corporations, somewhat offset by higher-than-expected borrowing by local government.

‘The estimated deficit of £141.1bin is still, however, the second highest level of borrowing as a share of national income since the Second World War, surpassed only by the amount borrowed in 2009/10.’

Crawford added that last year’s lower borrowing might not be sustained in the future.

 ‘As the source of lower borrowing last year was primarily due to lower borrowing by public corporations and lower than expected spending by central government on public services, it could turn out to be a one-off windfall for the government rather than reflecting a permanently better underlying fiscal position,’ said Crawford.

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