The U.K. logged the biggest budget deficit for the month of August as benefit payments increased and corporation tax receipts declined, data from the Office for National Statistics showed Friday.
Excluding intervention, public sector net borrowing was GBP 14.4 billion in August, which was equal to the net borrowing in August 2011. Nonetheless, the deficit was slightly below the GBP 15 billion shortfall forecast by economists.
Tax revenues climbed 1.8 percent, while spending grew 2.5 percent. Revenues were hurt by a 2.1 percent fall in the corporation tax receipts. Meanwhile, benefit payments increased 4.9 percent.
At the same time, public sector net debt totaled GBP 1,039.5 billion at the end of August, which was equivalent to 66.1 percent of gross domestic product. The Office for Budget Responsibility had earlier estimated the deficit to peak at 76.3 percent of GDP in 2014-15.
During the first five months of the fiscal year, the deficit excluding the transfer of Royal Mail pension, increased to GBP 59 billion. Chancellor George Osborne is likely to miss the GBP 120 billion full year target.
In an interview to Channel 4 late Thursday, Bank of England Governor Mervyn King said it would be acceptable to Osborne to miss his pledge on debt reduction due to a global economic slowdown.
Data showed that in 2011/12, public sector net borrowing was GBP 119.3 billion, this was GBP 6.7 billion lower than the Office for Budget Responsibility forecasted net borrowing for 2011/12 of GBP 126 billion.
Looking ahead, Martin Beck at Capital Economics said it is possible that the recent improvement in the economic news will cause the borrowing trend to improve soon. However, the economist said it would require a dramatic turnaround to put borrowing back on track to meet the OBR's plans.
by RTT Staff Writer
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