Belfast Telegraph

Government borrowing was £10.4bn for April

By Ben Woods

The Government borrowed a surprise £10.4bn last month in the final update on its finances before the general election.

The Office for National Statistics (ONS) said public sector net borrowing, excluding State-owned banks, rose by £1.2bn in April to reach the highest amount borrowed for the month since 2014.

It came in higher than the expectations of economists who had pencilled in a smaller figure of £8.8bn.

Martin Beck, senior economic adviser for think tank EY ITEM Club, said the new fiscal year "began on a disappointing note for the public finances".

He added: "The culprit for April's weakness partly lay with tax receipts. Total central Government revenues rose by 3.9% compared to 6.2% in March, the slowest rate of increase in 12 months. Meanwhile, income tax receipts were up by only 1.4%."

However, the statistics agency gave the Government a boost ahead of the election vote on June 8 by revising down last year's deficit.

It said borrowing, excluding banks, for the financial year - April 2016 to March 2017 - dropped by £23.4bn to £48.7bn, in contrast to the same period last year. It was the lowest annual borrowing figure since March 2008 and below the Office for Budget Responsibility's (OBR) prediction of £51.7bn.

The Government will face a stiff challenge to balance the books in the coming months as economists expect rising inflation to eat into consumer spending, causing a slowdown.

Such a slowdown could have a damaging effect on the Government's coffers, as it would recoup less VAT on goods if households tighten their belts.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said April's borrowing figures suggest the drop in gross domestic product to 0.3% growth in the first quarter "won't be just a blip. Admittedly, the OBR expects borrowing to rise this year to £58.3bn in 2017/18, from £51.7bn in 2016/17, and it anticipates tax receipts rising only by 3.7%.

"But this forecast reflects the fact that the surge in self-assessment tax receipts in January and February 2017 will not be repeated this fiscal year. Tax receipts growth, therefore, would have to significantly exceed the OBR's full-year forecast in the first few months of this fiscal year in order to suggest that the fiscal consolidation is on track."

Belfast Telegraph