Reuters/London
Public finances unexpectedly deepened in November, adding to Finance Minister George Osborne’s already tough challenge of hitting his budget deficit target this year.
Headline public borrowing rose to £14.2bn, 10% higher than in the same month last year and way above the median forecast of £11.8bn in a Reuters poll of economists.
“Barring a Christmas miracle, the chancellor looks extremely unlikely to meet his borrowing forecasts this year,” Capital Economics economist, Paul Hollingsworth, said.
Osborne is aiming to turn Britain’s budget deficit into a surplus by the end of the decade which would bolster his credentials as a possible next prime minister and allow for income tax cuts before elections in 2020.
But he has struggled to make headway in recent months, partly reflecting a slowdown in Britain’s strong economic recovery over the past two years.
After yesterday’s data, the deficit in the first eight months of the financial year was already close to the full-year target.
The Office for National Statistics (ONS) said the comparison with November 2014 was distorted by about £1.1bn in fines paid last year by financial institutions caught in a foreign currency trading scandal.
Also, Britain paid about £1bn more to the European Union in November this year than it did in the same month last year and it spent about the same amount more on public investment, the ONS said.
On the positive side for the government, tax revenues continued to rise, part of an encouraging trend for Osborne after Britain’s economic recovery failed initially to bring in much more income tax.
For the first eight months of this tax year, public sector net borrowing was 8.9% lower than between April and November 2014 at £66.9bn.
That was close to the Office for Budget Responsibility’s (OBR) target of £68.9bn for 2015-16 as a whole.
The OBR, Britain’s official budget forecaster, said in November it expected the deficit to fall more sharply in the remainder of the financial year than it has done so far.
Robert Chote, chairman of the OBR, said he still thought the pace of reducing the deficit would pick up, helped by self-declared income tax payments which land in January and spending cuts which have not yet shown up in the numbers.
“We think there are a variety of reasons to think that the fall in the deficit is going to be faster over the remainder of the year than it has been to date,” he told BBC radio.
Deutsche Bank economist, George Buckley, said Osborne was likely to get back closer to his target in the months ahead.
