23.06.14
Public sector borrowing up £4.6bn in May
Public sector borrowing in May was £13.3bn, up £4.6bn from the same month last year when it was £8.7bn, figures from the Office for National Statistics (ONS) have revealed.
The Public Sector Finances, May 2014 report estimates that the monthly deficit increased due to there being no transfers from the Bank of England’s Asset Purchase Facility Fund in the month. This is compared to last year when £3.9bn was transferred during May.
However, if the public sector net borrowing figures excluded the temporary effects of the one-off payments, the year-on-year increase was only £700m, the figures state.
A Treasury spokesman said: “The net borrowing figures continue to be in line with the budget forecast, which predicts the deficit to have halved by the end of this year. But the job is not yet done, which is why we must continue to work through the plan that is building a resilient economy.”
Commenting on the public sector finances for May 2014, David Kern, chief economist at the British Chambers of Commerce (BCC) said it was ‘disappointing’ that for the second month in a row underlying net borrowing was higher than the previous year.
He added that if this continues, the reduction in borrowing that the Office of Budget Responsibility (OBR) predicted in March will become a real challenge.
“It is clear that Britain’s fiscal position remains difficult despite the stronger than expected economic growth we have seen recently,” stated Kern.
In order to tackle the challenge, it has been suggested that the government continues to reduce the share of current public spending in GDP.
Martin Beck, senior economic adviser to the EY Item Club, said: “Even the underlying picture points to the public finances improving at a rate well short of the recovery in the economy.
“It could be that recent reforms to the tax system, including rises in the tax-free personal allowance and cuts in corporation tax, combined with structural shifts in the labour market towards lower paid work, are contributing towards economic growth that is simply less ‘tax-rich’ than in the past.
“If true, achieving the OBR's borrowing target for the fiscal year as a whole may well prove to be a challenge.”
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