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Borrowing figures boost for Osborne

Published 23/04/2015

Chancellor George Osborne has been boosted by figures showing that public sector borrowing fell to £87.3 billion in the year to March from £98.5 billion in 2013/14
Chancellor George Osborne has been boosted by figures showing that public sector borrowing fell to £87.3 billion in the year to March from £98.5 billion in 2013/14

George Osborne received a pre-election boost today as official figures showed he beat his target for reducing annual public sector borrowing for the latest financial year by nearly £3 billion.

Borrowing - excluding the effect of bank bailouts - was £87.3 billion for the year to the end of March, down from £98.5 billion in 2013/14, according to the Office for National Statistics (ONS).

The result undershot the latest target of £90.2 billion set by the independent Office for Budget Responsibility (OBR) at the time of last month's Budget.

It means that annual borrowing (GDP) has fallen by more than £60 billion from £153.5 billion in 2009/10 just before the Coalition came to power.

As a percentage of gross domestic product (GDP) it has dropped by half from 10.2% to 4.8%.

However, underlying debt of £1.48 trillion is more than £500 billion higher than the 2009/10 figure of £956 billion.

The nation's debt represents 80.4% of GDP, up from 62% five years ago.

Annual borrowing figures received a boost from the best March in 11 years for the public finances, with the deficit for the month at £7.4 billion, £400 million lower than a year ago.

Treasury coffers were boosted in the month by income and capital gains tax receipts up £700 million from last year to £15.5 billion and "exceptionally low" index-linked debt interest payments, due to low inflation.

For the full fiscal year, income and capital gains tax receipts grew by £8.1 billion to £169.7 billion and receipts for stamp duty on land and property rose by £1.5 billion to £10.9 billion.

The annual borrowing total was also improved by a £1.3 billion downward revision for the previous total for the year to February.

Howard Archer, chief UK and European economist at IHS Global Insight, said the data was "welcome news for the Conservatives ahead of May's general election as it helps their credibility on the public finances".

But he said the fact that borrowing amounted to 4.8% of GDP "highlights the fact that eradicating the fiscal deficit is still very much a work in progress".

Rain Newton-Smith, CBI director of economics, said: "The Government's deficit as a share of GDP has halved during the course of this Parliament.

"There is still plenty more to do though, so whoever forms the next government must prioritise deficit reduction. Sound public finances are vital both to supporting business confidence and funding sustainable public services."

David Kern, chief economist at the British Chambers of Commerce, said: "We have to make more progress towards stabilising our public finances - it is a difficult but necessary task.

"The challenges in the financial sector and lower oil and gas output constrain our ability to generate tax receipts. The simple if uncomfortable truth is, we must focus on reducing public spending so that we can live within our means."

However Martin Beck, senior economic adviser to the EY ITEM Club, said low inflation meant the cost of servicing Government debt was likely to remain "very low" for at least the first half of 2015/16.

He said: "The OBR has taken a more cautious view of the outlook for both the economy and the public finances, but there is now a good chance that these expectations will be exceeded.

"This suggests that the next Government will probably be able to achieve its borrowing targets with a lesser degree of fiscal consolidation than is currently assumed."

The TUC pointed out that the OBR's forecast for George Osborne's first Budget in June 2010 was for the deficit to have been reduced to £37 billion in 2014/15.

TUC general secretary Frances O'Grady said: "The Chancellor has missed his deficit targets by a country mile. He is borrowing £50bn more this year than his initial target because of the abysmal failure of his economic plan.

"The extreme cuts the Conservatives want after the election will kill off the recovery, put wages back in decline and leave our schools, hospitals and other services without the vital revenues they need.

"It's time for a new economic plan based on investment in the skills, infrastructure and innovation needed to create good jobs with decent wages."

Mr Osborne wrote on Twitter: "New data today confirms the deficit is less than half what it was - 4.8% of GDP - down from more than 10%. More to do but the plan is working."

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