City warns Chancellor over 'grim' pre-Budget backdrop
CHANCELLOR George Osborne was dealt an unexpected pre-Budget blow as Government borrowing last month came in higher than City expectations.
Public sector net borrowing for February, excluding financial interventions such as bank bailouts, was £11.8bn, compared to £9.5bn a year earlier, the Office for National Statistics (ONS) said yesterday.
Borrowing for the year to date now stands at £123.5bn after the Government recorded its weakest tax haul since January last year.
The worse-than-expected performance will dash hopes that the Government is on course to beat its £148.5bn target for the financial year.
Economists had been earmarking a potential £10bn windfall for the Chancellor ahead of today's borrowing figures, although experts warned that next year's tough borrowing target of £116 bn would give the Government little room for manoeuvre in the Budget.
Jonathan Loynes, chief European economist at Capital Economics, said the figures, combined with higher-than-expected inflation of 4.4%, gave a "grim Budget backdrop", though total borrowing for the year should still undershoot the Government target.
Total tax receipts fell by nearly 1% in February to £43.1bn, the ONS said, the first decrease since January last year.
Meanwhile, Government spending increased by nearly 5% to £49.3bn.
Within this figure, interest paid on borrowing increased by 11.2% to £4bn.