UK public finances weaken in first half of tax year ahead of Brexit budget
LONDON – British public borrowing rose more than a fifth in the first half of the tax year, official figures showed on Tuesday, as a decade-long trend of deficit reduction comes to an end even before Brexit.
Public sector net borrowing in September alone totalled 9.4 billion pounds, excluding public-sector banks, up from 8.8 billion in September 2018 and just below economists’ average forecast of a 9.7 billion pound deficit in a Reuters poll.
But looking at the six months since the start of the current tax year in April, borrowing was 21.6% higher than the same period in 2018 at 40.3 billion pounds, the Office for National Statistics said.
Tuesday’s figures confirm signs already apparent last month that Britain’s government is on course to miss a goal of keeping borrowing below 2% of gross domestic product in 2020/21, due to increasing public spending and statistical revisions.
Prime Minister Boris Johnson aims to take Britain out of the European Union by the end of this month after securing a new transition deal from the EU. But a delay looks likely after he suffered an initial defeat in parliament on Saturday over his plans.
If Johnson gets his way, analysts at the UK in a Changing Europe think tank estimate that weaker trade ties with the EU will badly damage Britain’s economy and reduce tax revenues by up to 49 billion pounds a year compared with staying in.
The somewhat closer ties proposed by his predecessor Theresa May – which parliament rejected three times – would have lowered government revenue by about 39 billion pounds over the medium term.
New finance minister Sajid Javid said early in September that he was “turning the page on austerity”, and is due to present detailed budget plans on Nov. 6.
He promised the biggest spending increases in 15 years – a move widely seen as preparation for a potential snap election that Johnson wants to break the Brexit impasse – and also plans to set out new longer-term fiscal rules at the budget.
Tuesday’s figures showed a 5.4% rise in day-to-day government spending on public services for the year to date, while tax revenues rose by 2.8%.
Corporation tax receipts fell by 1.1%, the biggest fall in the first half of a tax year since 2013.
Last month the ONS sharply revised up its estimates of Britain’s public borrowing to better account for the likelihood that many graduates will not repay all their student loans, as well as an overestimate of corporation tax received last year.
Borrowing totalled 1.9% of GDP in 2018/19, according to the latest figures.
Despite the statistical revisions, British public borrowing last year was still the lowest since 2001/02, and down from a peak of 10.2% of GDP reached in 2009/10 just after the depths of the financial crisis.
As in most other big economies, debt is still much higher than before the crisis, however.
Tuesday’s figures showed that public sector net debt totalled 80.3% of GDP in September, excluding public-sector banks, or 72.2% once the effect of a temporary Bank of England lending scheme was stripped out too.
Britain’s debt-to-GDP ratio was below 40% before the 2008/09 financial crisis.
(Content & Photos Syndicated Via Reuters)
(Reporting by David Milliken and William Schomberg)