Deficit revised up due to higher council borrowing

23 Sep 15

Higher than expected borrowing by local authorities has led to an upward revision of the public sector deficit in the first four months of the year, figures released by the Office for National Statistics have revealed.

In its July release a month ago, the ONS said borrowing was down by £7.3bn year-on-year, across the first four months of 2015/16. But the Office for Budget Responsibility has noted that revisions have since reduced the level of improvement, including an upward revision of £2.4bn in local authority borrowing.

Figures published today for spending in August do not improve the picture. Public sector net borrowing in the month stood at £12.1bn, up by £1.4bn compared to 2014.

This plus the revisions mean that public sector borrowing for the first five months of the current financial year now stands at £38.4bn, about £4.4bn less than the same period in 2014/15.

In its analysis, the OBR stated: “Higher borrowing in August and upward revisions to borrowing (particularly from local authorities) for the April to July period mean that year-to-date borrowing is now only £4.4bn lower than a year ago over the first five months.

“There is some evidence that local authority borrowing could be higher than assumed in the July Economic and Fiscal Outlook, given the latest Department for Communities and Local Government information on local authority current spending. We will be looking at this carefully in our next forecast. Other elements, such as the growth in central government receipts, are close to their full-year forecast.”

Following the latest figures, the OBR said that meeting the projections it made at the July Budget, forecasting borrowing of £69.5bn during 2015/16, would require a £20.6bn reduction in borrowing over the full financial year.

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