The UK’s public finances were weaker than economists expected in April, the first month of the new financial year, although there was a one-off boost to the public coffers from the government’s absorption of the Royal Mail pension fund.
The UK notched up a public sector net surplus in April of £16.5bn (excluding financial interventions) because the £28bn in assets from the Royal Mail pension fund were accepted on to the government books, while the fund’s £38bn in liabilities were classed as contingent liabilities and kept off the balance sheet. However, the underlying net borrowing figure in April was £11.5bn compared with £9.1bn in April last year.
Vicky Redwood, an economist at Capital Economics, said the underlying net borrowing figure was “pretty nasty” and provided “more evidence to suggest that the trend in public sector borrowing has deteriorated since the start of the year”.
The UK is in the middle of seven years of austerity as the coalition government aims to eliminate the current structural deficit by 2016-17.
Government tax receipts rose 1.3 per cent in April compared with the same month a year ago, with income tax receipts up 2.1 per cent. Government spending rose at a faster rate of 3.8 per cent, with net spending on social benefits up 5.4 per cent.
Corporate tax receipts fell 11.5% in April compared with a year ago.
David Page, an economist at Lloyds Bank, pointed out that last April the finances got off to a poor start only to recover ground over the subsequent months, adding that the figures were also prone to revision. “However, a continuation of this month’s trend would imply the 2012-13 deficit coming in above the official forecast for this year of £92bn,” he said.
Public sector net debt, excluding the temporary effects of financial interventions, was £1006.3bn, equal to 64.8 per cent of gross domestic product.