Public sector borrowing in April hit a record £10bn for the month, a rise of £2.7bn over the previous year, according to provisional estimates from the Office for National Statistics.
The ONS says this is because last year’s net borrowing was reduced by a one-off £3.5bn boost in tax revenue from the previous government’s Bank Payroll Tax.
But the record borrowing for the month, which excludes the temporary effects of the government’s financial rescue of the banks, has still surprised economists.
British Chambers of Commerce chief economist David Kern said that the ‘higher than expected’ borrowing figures represented a ‘disappointing’ start to the financial year.
But he added: ‘There are a number of special factors that might account for the large deficit, and we should not give too much weight to one figure. However, it is clear that the government’s plans to reduce the deficit by more than £20bn over the year will be a challenge.
‘The fragility of the economic recovery is creating a difficult backdrop, but the government must not deviate from its strategy to restore stability in the UK’s public finances.’
The Office for Budget Responsibility said that April’s borrowing rise was due to the bank payroll tax. Its commentary on the figures added that, excluding this, tax receipts would have been up 7.9% year on year, close to its projection for the 2011/12 year ahead.
The monthly borrowing is down compared with last month. The ONS has revised the borrowing figure for March down by £0.7bn to £17.9bn.
Total borrowing for the past financial year has also been revised down.
Initial figures published last month showed that borrowing for 2010/11 was £141.1bn. However this has been revised to £139.3bn, due to a reduction in the amount borrowed by central government.
The OBR said that this might be revised down again, as some taxation receipts received in May and June, particularly for VAT, will relate to economic activity in 2010/11.
Carl Emmerson, deputy director of the Institute for Fiscal Studies, said: ‘Spending grew more strongly in April than was forecast by the OBR for the year as a whole in last month's Budget – this was due to strong growth in welfare payments. However, as this is only the first month of the financial year, these figures on their own give us little clue as to how borrowing will compare to the OBR's Budget forecasts for the year as a whole.’
