George Osborne's attempt to cut Britain’s deficit was dealt a blow today when official figures revealed that the Government borrowed £3 billion more than expected last month.That sounds awful. Obviously, their deficit cutting has inhibited growth and they need to change course.
Public sector finances suffered from a 20 per cent fall in corporation tax receipts from business while public spending rose by 5 per cent, fuelled by higher benefit payments.
Overall public sector net borrowing came in at £600 million in July, compared with a surplus of £2.8 billion in the same month last year. City's expectations had been for a surplus of £2.5 billion.
Public sector net debt now stands at above £1 trillion, compared to £940 billion a year ago, and represents 65.7 per cent of the UK's GDP, up from 61.8 per cent last year.
July is normally a strong month for tax income, but total receipts fell 0.8 per cent, driven by the drop in corporation tax. The poor figures were compounded by a revision of net borrowing for April to June, which was revised up by £1.4 billion. It means net borrowing is £44.9 billion, £9.3 billion higher than a year ago.
The disappointing figures are likely to put pressure on Mr Osborne to cut back on departmental spending still further.What's that old saying? Something about learning from the past and being doomed?
At the weekend it emerged that civil servants in the Treasury have been privately warning colleagues across Whitehall to prepare for a fresh round of cuts following the disappointing tax receipts. These cuts could come as soon as his autumn spending statement.
“There’s a lot of nervousness and other officials are talking to their oppos [opposite numbers] in spending departments,” said a Whitehall source. “They are saying we haven’t got enough cash and expect a much, much harsher environment.”
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