By Richard Johnstone | 23 April 2013
Public sector borrowing in 2012/13 was £120.6bn, excluding special factors, down just £300m on the previous year, the Office for National Statistics has announced.
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Today’s Public sector finances report revealed that borrowing in March, the last month of the financial year, was £15.1bn. This is £1.6bn lower than in the same month in 2012.
Public sector net borrowing for the whole of the 2012/13 financial year is estimated to be £86.2bn if the special factors are included. These comprise cash transfers from two public bodies to the Treasury worth £34.4bn. The first transfer was £28bn in assets from the Royal Mail Pension Plan as central government took responsibility for the company’s pension scheme liabilities.
The second transfer was £6.4bn in excess cash built up in the Bank of England’s £375bn quantitative easing programme. This has accumulated as a result of interest payments paid to the Bank on government bonds purchased under the programme.
If these factors are removed, underlying public sector net borrowing is estimated to total £120.6bn. This is a slight fall from the £120.9bn borrowed in 2011/12, and is also £300m lower than the Office for Budget Responsibility’s estimate for borrowing made in the Budget last month.
In its announcement today, the ONS warned that these first estimates could be subject to ‘sizeable revisions in later months’.
A Treasury spokeswoman said: 'Today’s data shows borrowing slightly down on last year and below market expectations. Though it is taking time, the government is fixing this country’s economic problems. The deficit is down by a third, a million and a quarter new private sector jobs have been created and interest rates are at near-record lows, benefiting households and businesses.'
In an analysis of the figures, the Institute for Fiscal Studies said the slight drop showed the effort made by Chancellor George Osborne in the Budget to ensure borrowing fell in 2012/13 appeared to have been successful.
However, IFS senior research economist Rowena Crawford said the £300m reduction was ‘negligible’.
She added: ‘Backwards revisions to data are common, so today’s figures will not be the last word on the matter.
‘Whether borrowing is slightly lower or slightly higher in cash terms from one year to the next is not of any direct economic importance. What is important is the bigger picture. The deficit has fallen in cash terms by almost one-quarter between 2009/10 and 2011/12. Last year saw further austerity measures being implemented, but weak economic performance has meant that the deficit was largely unchanged from its 2011/12 level. The same is also forecast to be true of the current financial year.’
The Centre for Economics and Business Research said it was ‘accounting fiddles’ that had made government borrowing fall.
CEBR economist Rob Harbron noted that borrowing was also reduced by £2.3bn from the proceeds of the auction of the 4G mobile communications spectrum in February. Without this, it is likely borrowing would have been even higher this fiscal year, he said.
‘When you dig beneath the surface, Osborne’s stewardship of the economy has failed to produce any reduction in public borrowing in 2012/13. Beyond the smoke and mirrors of the accounting fiddles, the real concern is that tax receipts grew very slowly, reflecting the feeble economic recovery. We don’t see evidence of a robust pick-up in UK growth occurring any time soon.
‘With public debt soaring into the next Parliament, the next government is going to face fundamental problems that, unlike the boost from accounting fiddles, won’t go away without making some difficult decisions.’
