Osborne's austerity drive bolstered
Published 21/10/2011 | 04:32
Chancellor George Osborne's austerity campaign was boosted after new figures showed the Government remained in sight of its fiscal targets.
A year after Mr Osborne detailed his far-reaching spending cuts, economists said there was still a chance the £122 billion of borrowings forecast by the Government's tax and spending watchdog for 2011/12 could be met.
The outlook follows better-than-expected figures for September, with borrowings of £14.1 billion better than the £15.4 billion seen a year ago, while August's estimate was also revised lower by around £2.2 billion.
The updates by the Office for National Statistics (ONS) meant the Government has lopped £7.5 billion from borrowings in the first half of the year. To match the March forecast for a £122 billion deficit, the fall over the next six months will have to be slightly bigger at £7.8 billion.
North Sea oil tax rises and the delayed impact of the 50p income tax rate may help meet this target, but experts in the City warned that the outlook for social security spending as unemployment rises and the impact of the current economic uncertainty would put strain on current fiscal forecasts.
Samuel Tombs, UK economist at Capital Economics, said September's figure was around £1 billion less than the City had been expecting and meant borrowing was now broadly on track to meet the full-year forecast of £122 billion.
He added: "Nonetheless, we doubt that these figures fully reflect the recent slowdown in the pace of economic growth and therefore we continue to expect the trend in borrowing to deteriorate in the second half of the fiscal year."
Treasury coffers were boosted during September after tax receipts rose 4.2% to £40 billion, boosted by the 20% rate of VAT. Spending on social benefits and debt interest was up on last year, but other spending by Government departments - mostly on public services - fell.
A Treasury spokesman said: "One year on from the spending review, and despite the global economic turbulence stemming from the crisis of confidence in the eurozone, today's figures show the Government's progress in delivering its deficit reduction plan."
The Office for Budget Responsibility is due to to revise its forecasts on November 29.