By Richard Johnstone | 21 August 2014
Public sector borrowing in the first four months of the financial year was more than £9bn higher than the same period in 2013/14, figures from the Office for National Statistics have revealed.
The £9.4bn increase from £23bn to £32.4bn is partly due to smaller one-off transfers from the Bank of England’s Asset Purchase Facility as a result of the quantitative easing programme. However, even once these are excluded, borrowing for the four-month period was £1.8bn higher, the Public Sector Finances July 2014 report stated.
Borrowing in 2013/14 was £105.8bn, and is forecast by the Office for Budget Responsibility to fall to £95bn in 2014/15.
According to the report, borrowing in July was £200m, around £800m lower than the same month in 2013. There was a £500m transfer from the APF to the Treasury that reduced the deficit in both of these figures.
According to the ONS, central government receipts excluding the APF for the financial year-to-date were £187.4bn, which is £3.8bn (2.1%) higher than the same period in 2013/14.
Central government expenditure was £221.7bn in the period, £2.7bn (1.2%) more than the previous year.
Responding to the figures, a Treasury spokesman said: ‘The government’s long-term economic plan is working, delivering economic security for hardworking people. Today’s Public Sector Net Borrowing figures continue to be in line with Budget forecast which predicts the deficit to have halved by the end of this year.
‘But the job is not yet done which is why we must continue to work through the plan that is building a robust economy.’
Analysing the figures, Soumaya Keynes, a research economist at the Institute for Fiscal Studies, said that the higher borrowing over the first four months of 2014/15 initially looked like bad news for the government’s prospects of achieving the £10bn drop in borrowing that has been forecast by the OBR for the year as a whole.
‘But a closer look at the figures suggests that things may not be as gloomy as they first appear,’ she said.
‘So far this year, central government spending has grown broadly in line with the OBR’s forecast for the year as a whole.
The higher levels of borrowing have been driven by weak growth in tax receipts – in particular, receipts of income tax, capital gains tax and National Insurance contributions. But this is in large part a timing effect that will unwind later in the year.’
In particular, she highlighted that the drop in the top rate of income tax from 50p to 45p in April 2013 had induced some high-income individuals to change the timing of their income, which boosted tax receipts in the early months of last year.
‘While this makes growth this year look weak, it is also expected to boost tax receipts in the final three months of this year.’
