By Richard Johnstone | 26 June 2012
An increase in central government spending meant public sector net borrowing hit £17.9bn last month, £2.7bn higher than the same time last year, it has been revealed today.
Figures from the Office for National Statistics show that Whitehall borrowed £3.4bn more in May than 12 months ago, as central government expenditure rose by £4bn but receipts by only £600m.The rise in borrowing follows a £16.5bn public sector surplus in April, as a result of the one-off transfer of £28bn of assets from the Royal Mail pension scheme to the Treasury.
Responding to the figures, the Office for Budget Responsibility said that borrowing was often high in May, reflecting the relatively low levels of tax usually received during the month.The spending watchdog said the year-on-year increase in monthly borrowing was driven by ‘strong growth in central government expenditure’, which was 8% higher than last year. Borrowing by local authorities and public corporations for the month was actually £600m lower than last year.
Central government receipts grew by only 1.6% in May, compared with the OBR’s March forecast of 4% for the 2012/13 year as a whole.
However, the OBR also cautioned that the data was ‘particularly uncertain’ at this early stage of the financial year, and could be revised. Some departments will still be reporting spending estimates rather than actual spending figures.
Total borrowing in 2011/12 has also been revised up by the ONS today, by £3.2bn to £127.6bn. This is £1.6bn above the OBR’s prediction in March’s Economic and fiscal outlook, with the upward revision split evenly between revised estimates for borrowing in central government, and local authorities and public corporations.
The OBR’s commentary added that this estimate also remained provisional and subject to change. For example, some data regarding local authority spending in 2011/12 will become available only at the end of August.
Rowena Crawford, a senior research economist at the Institute for Fiscal Studies, said the figures showed central government current spending had grown more quickly than forecast for over the last two months. This was mainly due to relatively rapid growth in welfare spending in both April and May.
She added: 'Today's figures also include a number of large revisions to data from earlier months. Borrowing in 2011/12 is now estimated to have been £127.6bn, above the £124.4bn estimated in last month's figures and also above – although close to – the £126bn forecast by the Office for Budget Responsibility at the time of the March Budget.’