U.K. public finances unexpectedly resulted in a deficit in July due to decline in tax receipts as well as an increase in spending, the latest figures from the Office for National Statistics showed Tuesday.
The public sector net borrowing excluding the temporary effects of financial interventions (PSNB-ex) was GBP 0.6 billion, which was in contrast to July last year when data indicated a repayment of GBP 2.8 billion.
The latest outcome was also in contrast to expectations for a surplus figure of GBP 2.2 billion.
This reflected "a sharp 20 percent annual drop in corporation tax receipts," said Vicky Redwood, an economist at Capital Economics. July is a big month for tax receipts and usually sees a surplus, she added.
The statistical office said that due to the impact of accrual of ticketing income from the Olympic Games, the public corporation figure for net borrowing in August will be lower than normal. July is always a month when high taxes on income and wealth are recorded due to self assessment returns and quarterly corporation tax figures, ONS noted.
In 2011-12, PSNB-ex was GBP 125 billion, which was GBP 15.7 billion lower than in 2010-11. This was lower than the GBP 126 billion net borrowing estimated by the Office for Budget Responsibility (OBR) for 2011/12.
Redwood noted that with borrowing for 2012/13 overall expected to massively overshoot the OBR's forecast of GBP 120 billion (excluding Royal Mail effects) by over GBP 35 billion, and with the recovery falling well short of the OBR's expectations, "we think that the Government will struggle to cut borrowing at all next year either."
At the end of July 2012, the public sector net debt, excluding the temporary effects of financial interventions was GBP 1032.4 billion or 65.7 percent of GDP. This compares to GBP 940 billion or 61.8 percent of GDP at the end of July 2011.
The report also showed that in July, central government accrued current expenditure was GBP 50.2 billion, 5.1 percent higher than July 2011. Central government net investment rose 32.8 percent annually to GBP 2.5 billion.
The government's net cash requirement, meanwhile, was a surplus of GBP 4.2 billion, 2.6 percent lower than last year.
by RTT Staff Writer
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