Bank fines swell Treasury coffers
Bank fines for rigging the foreign exchange market helped boost the public finances last month as George Osborne battles to meet annual deficit targets, official figures showed today.
Public sector borrowing - excluding the effect of bank bailouts - was £14.1 billion in November, better than expected and £1.6 billion lower than in the same month last year.
Treasury coffers were swollen by £1.1 billion in penalties from banks fined by the Financial Conduct Authority (FCA), figures from the Office for National Statistics (ONS) showed.
It meant borrowing for the April-November period representing the financial year-to-date was £75.8 billion, about £500 million lower than for the same period last year.
This is the first time in 2014/15 that the year-to-date shape of the public finances has been better than the same period a year before.
The Office for Budget Responsibility (OBR) is forecasting a 6% fall in the annual deficit for the year to March.
This was revised down earlier this month from a tougher target of 11% after disappointing income tax receipts.
The latest figures deliver a boost to the Chancellor as he tries to deliver the goal.
Banking fines, which have been spread over November and December but are all being counted in November's public finance figures, have helped borrowing so far in 2014/15 to swing lower.
However the April-November borrowing figure is still only 0.7% lower than in 2013/14.
The public finances for 2014/15 so far were also boosted by a £2.4 billion downward revision to borrowing in the April-October period by the ONS.
This included a better-than-expected picture for VAT receipts and lower departmental spending.
But there was a sting in the tail for Mr Osborne when the ONS said an additional EU budget contribution of £2.9 billion will be recorded when December's figures are published next month.
Meanwhile, the November data today showed net social benefits - including state pension, unemployment benefit and child benefit - reached £18.1 billion, the highest level since records began in 1993.
Income tax-related receipts are up £400 million compared to the same month last year though the increase was slower than it was then.
They are ahead £1.1 billion, or 1.2%, in the year to date, weaker than had previously been expected despite sharp jobs growth, because of the prevalence of part-time and low-paid jobs.
Underlying net debt was £1.457 trillion, 79.5% of gross domestic product (GDP), up from 79.2% in October and 78.2% in November last year.
A Treasury spokesman said: "The week before Christmas has seen three pieces of good news confirming that the long-term economic plan is working.
"Inflation has reached its lowest level for 12 years and regular earnings are growing in real terms for the first time since 2009.
"It is encouraging that today's figures show borrowing for the month is lower than last year, due to stronger receipts.
"However, the effects of the great recession are still being felt in our economy and the public finances. That's why we will continue working through the plan that is building a resilient British economy."
Samuel Tombs, of Capital Economics, said despite the improvement in the public finances, borrowing would still have to be a "chunky" £6 billion or 27% lower in the remaining four months of the year to meet the OBR's annual target.
There are expectations of a boost in January's figures thanks to a strong set of self-assessment tax receipts, due to tax rate changes.
But Mr Tombs added: "We continue to have our doubts as to whether even strong economic growth will bring about the much bigger reductions in public spending in future years as set out in the current fiscal plans.
"So while November's public finance figures are a step in the right direction, the road to fiscal sustainability look set to be long and bumpy."
Howard Archer, of IHS Global Insight, said the modestly improved figures were "a small early Christmas present for the Chancellor".
"Even so, George Osborne still faces a tough ask to meet his upwardly revised fiscal target for 2014/15," he added.
"Despite November's modest improvement and healthy economic growth this year, Chancellor George Osborne has suffered a disappointing fiscal year 2014/15 so far with the shortfall up modestly from 2013/14."