OBR: January public finance surplus smaller than expected

19 Feb 16

Public sector borrowing in February and March will need to be nearly 50% lower than the same two months in 2015 for the Treasury to meet its deficit target, the Office for Budget Responsibility said today.

Publishing an analysis of the January public finance figures, the spending watchdog said the £11.2bn surplus recorded in the month was smaller than expected.

A surplus is usually recorded in January as it is generally the biggest month of the year for tax receipts as payments of self-assessment and capital gains tax relating to the previous financial year. Although this year’s was around £1bn higher than the same month in 2015, it was below the expected £12.3bn surplus.

Overall, figures from the Office for National Statistics show borrowing over the first ten months of the 2015/16 stands at to £66.5bn, around £10.6bn lower than the same period in 2014/15.

In its response, the OBR said an extrapolation of the 13.7% fall would imply full-year borrowing of around £79bn. Although this would be around £13bn lower than 2014/16, this is around £6bn above the watchdog’s latest forecast, made at November’s Autumn Statement.

“On the current data, meeting our full-year forecast for 2015/16 would require borrowing to fall by £18.4bn in the year as a whole. That implies borrowing of £7bn over the next two months, compared with £14.8bn in the same period last year,” it stated.

“Our November forecast does assume stronger growth in receipts in the remainder of the year (particularly income tax and stamp duty land tax) but local authority borrowing as measured in the statistical bulletin looks likely to exceed our November forecast.”

However, the watchdog added there was “considerable uncertainty” as local authority borrowing is often subject to substantial revisions.

Responding to the figures, the Institute for Fiscal Studies said, receipts of capital gains tax were strong and those of corporation tax were weak in the January figures, both of which had been anticipated by the OBR.

Self-assessment income tax receipts were also weak in January, although it is possible that, as the last two days before the payment deadline were at the weekend, some of these payments will be reflected in next month’s numbers, research economist Thomas Pope suggested.

“A simple extrapolation of borrowing over the first ten months of this financial year suggests that it is on course to come in closer to £80bn than the £73.5bn forecast by the OBR,” he added.

“But £4bn of this apparent overshoot is accounted for by rapid growth so far in investment spending, which may well not persist. Were borrowing to come in at around £76bn this should be considered to be very close to the OBR’s November forecast.”

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