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July 19, 2013 10:32 am
Britain’s public finances have yet to see any significant boost from the recovery in the wider economy, official figures showed on Friday, underpinning the fragility of the upswing so far.
Excluding a series of one-off factors that distort the figures, the public sector borrowed £12.4bn in June, half a billion pounds more than a year earlier. In the first three months of the financial year, underlying borrowing was the same as last year, in line with the Office of Budget Responsibility’s full-year forecast of a slight rise.
With borrowing remaining high, public sector net debt continues to rise rapidly, standing at 74.9 per cent of national income, compared with 71.6 per cent in the same period a year ago.
With the public finances appearing to evolve in line with forecasts from the independent Office for Budget Responsibility, the fiscal watchdog will have few grounds so far to expect much stronger growth or better public finances than it thought at the time of the March Budget, even though most economic data since then have exceeded expectations.
The borrowing figures for this month have been revised higher as the Office for National Statistics has dropped an assumption it inserted only last month that the Treasury would receive a £3.2bn windfall this financial year from Swiss banks reflecting the tax liabilities of UK citizens holding money there.
The ONS said that after the Swiss banking industry cast doubt on the assumptions, it would only book the payments when they are made rather than assuming a large figure in advance. So far, it said only £342m has been received by the exchequer.
Other upward revisions to income tax revenues for 2012-13 have also given the Treasury a boost as the resulting lower borrowing ensures that the figures again showed a falling deficit in that financial year.
Last month the opposition accused the government of failing to get borrowing down and losing credibility. In response to the revision, a Treasury spokesperson said: “The government is taking tough decisions to deal with the deficit: today’s data show that borrowing fell last year.”
Britain is more than three years into an eight-year austerity programme aimed at closing its deficit and progress has been slower than expected. Public sector net borrowing was about £120bn last year, roughly the same as the year before, and the official budget watchdog expects a similar amount of borrowing this year.
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