Borrowing outstrips expectations at midpoint of fiscal year

21 Oct 16

Public borrowing was £10.6bn in September – an increase of £1.3bn compared to the same month in 2015 – exceeding Office for Budget Responsibility forecasts and adding to the economic gloom.

The latest public finance bulletin, issued by the Office for National Statistics today, revealed that public borrowing for the year to date was £45.4bn, £2.3bn lower that at the same point last year. However, borrowing for the entire 2016-17 year was forecast by the OBR to come in at £55.5bn, just over £20bn down on 2015-16.

Public sector net debt at the end of September this year was £1,627.2bn, equivalent to 83.3% of gross domestic product and an increase of £39.5bn on September 2015.

Debt as a percentage of GDP fell by 1.0 percentage point compared with September last year, the fourth successive month that debt has fallen as a percentage of GDP.

Commenting on the figures, Thomas Pope, a research economist at the Institute for Fiscal Studies, said: “At the half way point in the financial year, tax receipts have disappointed while central government spending has been slightly lower than official forecasts for the year imply. Overall, borrowing looks set to be higher than the OBR forecast in March, possibly by a reasonable margin. The trend so far suggests that, over the year as a whole, receipts could undershoot by £14bn.”

However, he suggested some better news might be forthcoming in the near future with an expected rise in income tax payments on dividends, which could lower the tax undershoot to £8bn.

“On November 23, the new chancellor will present his response to a much changed economic outlook at the Autumn Statement. Borrowing looks likely to be larger this year than his predecessor expected in March, which will make the challenge he faces more difficult,” Pope added.

At CIPFA, chief executive Rob Whiteman agreed that chancellor Philip Hammond was facing a tough outlook ahead of the Autumn Statement.

“While capital investment to bolster productivity and economic activity would be generally welcomed, these latest ONS figures are troubling indicators, which will give the chancellor even less flexibility for his Autumn Statement,” he said.

“However, we can expect a lot of forecasting volatility in this extended period of uncertainty since the June 2016 referendum and when we actually leave the EU. A period that will last several years.”

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

Did you enjoy this article?

AddToAny

Top