Government hit by unexpected borrowing rise
The government’s efforts to cut the deficit suffer a blow after a small rise in borrowing in July, but it says it will stick to its “economic plan”.
Figures from the Office for National Statistics (ONS) show that a 4 per cent increase in government spending outstripped a rise in tax receipts.
This is an unusual state of affairs in July, when there tends to be a surplus in the government’s accounts due to company tax payments. The last time there was net borrowing in July rather than a surplus was 2010.
Public sector net borrowing, excluding financial interventions, was £488m, compared with a surplus of £823m in June. When interest payments from quantitative easing (QE) are included, this figure falls by about £400m to £62m.
Public sector net debt as a proportion of the UK’s total output hit a record 74.5 per cent in July.
The independent Office for Budget Responsibility, which monitors the public finances, expects a deficit of around £120bn this financial year, above last year’s £116.5bn.
‘Rescue to recovery’
A Treasury spokeswoman said the economy was “moving from rescue to recovery”, adding: “There is still a long way to go as the UK recovers from the biggest economic crisis in living memory, and the government is sticking to the economic plan that has already cut the deficit by a third and enabled the private sector to create over 1.3 million new jobs.”
Martin Beck, UK economist at consultancy Capital Economics, said the figures showed the public purse has “yet to benefit from the economic upturn”.
He said: “July typically sees a budget surplus, with this month an important one for corporation tax and self-assessment receipts.
“But with growth in spending outstripping that in receipts, July 2013 saw a break with this.”
Despite the rise in borrowing, the economy is growing: by 0.6 per cent in the second quarter of 2013 and 0.3 per cent in the first three months of the year.
