LONDON: Britain’s public finances showed an underlying improvement in February compared to a year earlier, but the gain may not be enough to meet a more ambitious borrowing target set out by finance minister George Osborne earlier this week.
Deficit reduction has been Osborne’s central economic policy since Britain’s Conservative-led coalition came to power in 2010, when Britain’s budget gap was 11 percent of annual economic output — one of the highest for a major economy.
On Wednesday Osborne unveiled new forecasts predicting that the government will borrow £107.8bn this year, 6.4 percent less than in the 2012/13 financial year, compared to a three percent reduction targeted in December.
Economists said the government could face a challenge meeting the new, tougher forecast from the Office for Budget Responsibility.
Data released yesterday by the Office for National Statistics showed that borrowing for the first 11 months of the tax year stood at £99.3bn — 4.3 percent less than in the same period a year ago. That puts a hefty onus on the public finances in March to make up the difference.
“For this to be achieved, borrowing in March will have to show a substantial improvement of £2.9bn compared with last year,” said Philip Shaw, chief economist at Investec.
Figures for government borrowing in February alone create uncertainty about whether such savings can be made. Britain’s public borrowing in February — excluding financial sector interventions and transfers from the Royal Mail pension plan and bond interest paid to the Bank of England — came to £9.311bn, up from £9.163bn a year before.
Economists polled by Reuters had forecast a slightly smaller £9bn, but markets were unmoved by the data. However, borrowing figures in February 2013 were flattered by £2.3bn of one-off receipts from the sale of 4G mobile phone spectrum, so economists said the February 2014 figures represented an underlying improvement.
“February’s public finances figures confirm that the UK’s budget deficit is continuing to make slow downward progress,” said Jonathan Loynes, chief European economist at Capital Economics.
Reuters
