Belfast Telegraph

Province warned it can't avoid cutbacks

By Michael McHugh

Improved public finances will not save Northern Ireland from spending cuts, it has been claimed.

The UK sank further into the red in July with net borrowing of £3.8bn over the month, although this improved on 12 months earlier when borrowing hit £6.1bn, according to the Office for National Statistics.

The lower-than-expected sum brings borrowing for the first quarter to £44.9bn, with forecasts of £149bn for the full year from the independent Office for Budget Responsibility.

PriceWaterhouseCoopers chief economist Esmond Birnie said: "Government spending is still rising, but this is likely to moderate later in the year as spending cuts begin to bite."

He added: "But there is little comfort to the Northern Ireland Executive - this is still a huge budget deficit by any standards, and there is nothing in today's figures to dissuade the Chancellor from the need for severe public spending cuts when details of the Spending Review are announced on October 20."

The latest figures come as Chancellor George Osborne warned this week of the danger of not sorting out the deficit amid discontent over the savage cuts planned in June's emergency Budget - although Labour has accused the coalition of gambling with the recovery.

July's figures are usually boosted by corporation tax and VAT receipts, although the recession forced the UK to borrow during the month for the first time in 13 years in 2009.

Today's figures showed some signs of recovery, however, with tax receipts of £49.7bn - a figure which is up £4.8bn on a year earlier, and the best July since 2008. The tax take was up 10.5% on a year earlier.

A Treasury spokesman said: "Today's figures show receipts strengthening in line with the OBR's forecast.

"However, tax receipts remain below their pre-recession peak, and the UK is still forecast to have the highest deficit in the G20 this year."

Mr Birnie said: "It is still very early days, but so far the overall trend suggests that public borrowing will be broadly in line with, or even slightly below, the Office for Budget Responsibility projections of £149bn in 2010/11."