By Richard Johnstone | 22 December 2014
Government borrowing will need to fall by more than a quarter in the rest of the current financial year in order for Chancellor George Osborne to meet the latest public sector borrowing target, an economic think-tank has said.
The Office for National Statistics published the Public Sector Finances report for November on Friday, which reported that public sector net borrowing in the month was £14.1bn – a decrease of £1.6bn compared to the same period last year. In the financial year to date, total borrowing stands at £75.8bn, a decrease of around £500m compared with the same period in 2013/14.
Analysing the figures, the Institute for Fiscal Studies said that although November’s borrowing represented a 10% fall on the previous year, but over the first eight months of the 2014/15 the government had only borrowed 1% less.
In order to hit the Office for Budget Responsibility's forecast for borrowing for the whole of 2014/15 – which stands at £91.3bn following a £4.9bn upwards revision at the Autumn Statement – borrowing over the next four months will need to be 26% lower than in the same months last year.
In total, £97.5bn was borrowed in 2013/14.
This is not impossible, the think-tank stated. ‘For example, we can expect bumper self-assessment income tax receipts in January due to changes in the timing of receipts induced by the pre-announced April 2013 reduction in the top rate of income tax from 50p to 45p.’
Also responding to the figures, Martin Beck, the senior economic advisor to the EY ITEM Club, said that meeting the OBR’s full-year borrowing forecast looked like a tough call.
Beck said that although November’s fiscal numbers may at first seem to provide evidence that the public finances were starting to share in the economy’s resurgence, the underlying position was not as positive.
‘Overall meeting the OBR’s forecast of a deficit of £91.3bn for 2014/15 still looks like a tough call. Looking further ahead, any delay in deficit reduction would raise questions over the Chancellor’s long-term ambition for a budget surplus and the hefty spending cuts implicit to achieving that, he added.
‘Tax receipts in November were boosted by fines on banks for breaking FX market rules. In the absence of this windfall, borrowing would have been a mere £0.5bn below the level a year earlier. Moreover, November’s deficit still leaves borrowing for 2014/15 to date only £0.5bn below that recorded in the same period in 2013/14.’
The ITEM Club uses the same models as the Treasury to produce economic forecasts, and had predicted that year-on-year borrowing could be as much as £9bn higher in 2014/15.
