22 March 2011
Public sector borrowing reached a record February-high last month according to official figures, reducing the likelihood of any ‘spring giveaways’ in tomorrow’s Budget.
The Office for National Statistics today said public sector net borrowing hit £11.8bn in February, up from £9.5bn in February 2010 and a record for the month of February. It also showed that predictions that February borrowing would fall to £6.9bn were well wide of the mark.
Total borrowing for the 2010/11 financial year now stands at £123.5bn. Although this remains well on target to meet the Office for Budget Responsibility’s full year borrowing forecast of £149bn, the poor February figures provide an unfavourable backdrop to tomorrow’s Budget.
Rowena Crawford, a research economist at the Institute for Fiscal Studies, said: ‘[Chancellor George] Osborne might not have much new scope for significant permanent net giveaways in his Budget tomorrow. Indeed, given the uncertainty over borrowing going forwards and the store that he has set by his fiscal consolidation plan, he might best be advised simply to bank any improvement in the public finances.’
A similarmessage came from the Ernst & Young Item Club yesterday.
The OBR is widely expected to give more optimistic public finance estimates in its analysis, which will be published alongside the Budget tomorrow.
The IFS predicted total public sector borrowing to come in £7bn less than forecast by the OBR in November. Crawford said lower borrowing had been driven by local authorities and other public corporations borrowing less so far this year to finance their day-to-day expenditure, coupled with a larger-than-forecast cut in public sector net investment.
According to the ONS, public sector net debt was £875.8bn, equal to 58% of gross domestic product, at the end of February, compared with £729.9bn, or 50.8% of GDP, a year earlier.
