UK deficit at record high, but still less than feared
23 Apr 10
UK Government borrowing is at a marginally lower level than was forecast, according to figures released yesterday, but the gap between tax and spending is still at a post-war high
The public borrowing figures show a budget deficit (public sector net borrowing requirement, including financial transactions) for March 2010 of £23.5bn. This was up from £20.1bn in March 2009, but was still slightly better than expected. Public borrowing in February 2010 was revised down sharply by around £2.7bn, resulting in public borrowing for 2009/10 as a whole undershooting Treasury Budget forecasts by around £3bn.
Overall, public sector net borrowing excluding financial interventions (the Treasury’s preferred measure) reached £163.4bn by the end of the last financial year. This is the highest figure since records began in 1946/7. This was less, however, than the Treasury’s forecast of £166.5bn in the March 2010 Budget and down more substantially from the £178bn deficit forecast in the December 2009 Pre-Budget Report.
John Cridland, the CBI Deputy Director-General, said: “Although today’s public borrowing figure was marginally lower than the Treasury’s forecast, the UK’s massive deficit must be tackled, whatever the outcome of the election.
“We need all the political parties to develop clear and credible plans to eradicate the deficit in five years, to help shore up recovery for the country as a whole.
“Any plan should focus on spending cuts, while preserving capital investment and avoiding tax rises, and commit to re-engineering public services so they can do more with less.”
John Hawksworth, head of macroeconomics at PricewaterhouseCoopers LLP, commented: “The public borrowing figures provide some good news for the Chancellor, particularly due to the downward revision to earlier borrowing estimates for February. Even with this £3 billion undershoot of the Treasury’s budget deficit forecast for 2009/10, however, this stills leave public borrowing at a post-war record as a share of GDP.
“There is still a large structural deficit to be tackled and this is likely to require further tax rises and real spending cuts once the recovery is secure, over and above what has already been announced.”
Government current receipts were down by 5.3 per cent in 2009/10 on a year earlier on an accruals basis, while central Government current spending was up by 6.8 per cent in 2009/10. The fall in tax revenues in 2009/10 relative to 2008/9 was driven by:
- a 19.5 per cent fall in corporation tax and petroleum revenue tax receipts;
- an 8.4 per cent fall in income tax and capital gains tax receipts;
- a 4.1 per cent fall in VAT receipts; and
- a much more modest 1 per cent fall in national insurance contributions.