June borrowing defies predictions with yearly increase

21 Jul 11
Public sector net borrowing for June was £14bn, an increase of £300m from a year ago.

By Richard Johnstone | 21 July 2011

Public sector net borrowing for June was £14bn, an increase of £300m from a year ago.

However, the monthly figures was less than May's £17.4bn.

Total government borrowing for the first quarter of the financial year was lower than in the same period last year, according to the figures released by the Office for National Statistics. The government has borrowed £39.2bn so far from April, down £0.4bn from the same quarter in 2010/11.

The Office for Budget Responsibility said that the June borrowing figure was about £1.5bn above market expectations. Its commentary on the figures said that the rise was due to an increase in central government spending of £2.3bn, while government receipts were only £2.1bn higher.

The OBR report added that the relatively small fall in borrowing for the quarter, compared with the £20.3bn fall it has predicted for the year as a whole, was also due to the slower than forecast growth in income. These rose by 5.6% on the month and 4.6% on the quarter compared with last year.

The OBR has predicted a 7.2% rise in receipts over the whole year. It said that if the one-off bank payroll tax in April 2010 was excluded from the calculations, growth ‘would be close to our full year forecast’.

It expects stronger year-on-year growth in receipts for the remainder of 2011/12 as offshore corporation tax income is expected to be up strongly. This will reflect both high oil prices and Chancellor George Osborne’s decision in March’s Budget to raise a supplementary charge from firms drilling in the North Sea.

The Institute for Fiscal Studies said that the figures ‘add to a complicated picture’ of the economy.

IFS research economist Rowena Crawford said: ‘Since the Budget was produced, the estimated outturn for economic growth in the first quarter of 2011 turned out to be weaker than the OBR anticipated and many independent forecasters have revised down their expectations for economic growth this year.

‘Government receipts in June were weak, in particular there was a fall in combined receipts from taxes on income and profits. But over the first three months of this financial year they appear to have held up. This suggests borrowing this year could still fall relative to last year as the OBR forecast, even if economic growth does disappoint.

‘But much uncertainty remains, in particular over the outlook for corporation tax receipts, which have so far underperformed relative to the OBR's forecast for the year as a whole. Next month's figures will be important since a large slice of annual corporation tax revenues is usually received in July.’

The ONS figures also show that net national debt was £944.3bn in June, equivalent to 61.9% of gross domestic product. This is up from £803.7bn last year, and an increase of more than 5 percentage points as a proportion of GDP.


CIPFA logo

PF Jobsite logo

Did you enjoy this article?