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Government is hit by a surprise deficit instead of usual surplus

Published 22/08/2013

Rising Government spending blew an unexpected hole in the UK public purse in July, official figures have shown.

The Office for National Statistics (ONS) said the state had to borrow a net £488m – the first time in three years there was a deficit rather than a surplus in July.

The public coffers usually show a surplus in July due to big tax payments by companies and individuals, but these were outstripped by an increase in spending by central government departments.

July's deficit was much worse than economists' average prediction of a £2.5bn surplus, and they said the figures suggest Britain's improving economy has yet to boost the state's finances.

But the Treasury insisted the economy is moving from "rescue to recovery" after the ONS reported higher tax receipts.

The ONS said public sector net borrowing, stripping out distortions from bank bailouts and quantitative easing cash, swung £1.3bn into the red in July from an £823m surplus a year earlier. The figures also showed that underlying public sector net debt as a proportion of the UK's gross domestic product (GDP) or total output hit a record for July at 74.5%.

Martin Beck, of Capital Economics consultancy, said: "While signs of economic recovery should eventually feed through into an improvement in the public finances, it looks like the Chancellor will have to wait a while yet."

Belfast Telegraph

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