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Local government borrowing increases in response to grant cuts

Net borrowing by local government increased in the first two months of this financial year, despite the public sector as a whole achieving a £1bn surplus.

The latest figures from the Office of National Statistics (ONS) show that public sector net borrowing was at £23.7bn in April-July 2016, compared to £24bn at the same point in 2015.

It is currently in surplus by £1bn in July 2016, although this is £0.2bn less than in 2015.

However, local government borrowing increased by £1.5bn in the same period. This largely due to decreases in grants received from central government, particularly in April, being partially offset by decreases in expenditure on goods and services.

The figures also show that overall public sector debt is still climbing. It is now at £1,604.2bn, an increase of £35.3bn from the same point last year.

Public sector debt is now 82.9% of the UK’s GDP, a slightly smaller proportion than last year.

The public sector has also saved £3.8bn on the cost of its day-to-day activities so far this financial year.

Its infrastructure spending has also increased from £2.2bn to £2.8bn.

Central government net cash requirement also decreased from £27.3bn to £22.2bn.

The ONS cautioned that the figures only represent the first two months of the 2016-17 financial year and may not provide evidence of wider trends.

Although the data includes spending since the UK voted to leave the European Union, the full impact of the decision on public sector spending and borrowing is not yet clear.

Following the referendum result, the then chancellor George Osborne announced that he was abandoning his commitment to return government spending to a surplus by 2020, a move supported by Theresa May’s new administration.

(Image c. Ken Teegardin)

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