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U.K. June Budget Deficit Exceeds Expectations

U.K. June Budget Deficit Exceeds Expectations
7/19/2013 7:08 AM ET

The U.K. budget deficit for June exceeded economists' expectations, suggesting little contribution to public finances from the economic recovery that is underway. Nonetheless, underlying public finances remain on track to meet the government target.

Net borrowing excluding interventions declined to GBP 8.5 billion in June, data from the Office for National Statistics showed Friday.

A cash transfer of GBP 3.9 billion from the Asset Purchase Facility Fund to the government reduced net borrowing. If these transfers are excluded then public sector net borrowing in June 2013 was GBP 12.4 billion, data showed.

The PSNB figure compares with last year's GBP 11.9 billion borrowing and the consensus forecast of GBP 8 billion.

The Chancellor George Osborne will be fervently hoping that the economy can extend and build on its recent signs of improvement, said IHS Global Insight's Chief U.K. Economist Howard Archer.

If it can, it will not only increase the chances of beating the fiscal targets for 2013/14 but make it easier for the Chancellor to rebut any further calls for an easing up in the pace of fiscal austerity, he added.

Accrued revenue from the Swiss tax deal in May was revised to a modest GBP 342 million from GBP 3.2 billion. The May borrowing figure was revised up accordingly to GBP 11 billion.

"This suggests that a more cautious approach is now warranted and the payments will be included as and when payments are received," the ONS stated.

Borrowing for 2012-13 excluding APF and Royal Mail transfers, totaled GBP 116.5 billion, which was GBP 2.1 billion lower than in 2011-12.

During the April to June period, the budget deficit excluding APF, remained unchanged at GBP 35.9 billion from a year earlier.

The Chancellor has now so far fulfilled his aspiration to see borrowing fall year-on-year, said Martin Beck, an economist at Capital Economics. But even in the near-term, June's borrowing data suggest the public finances remain a long way from health.

At the end of June, the public sector net debt excluding the temporary effects of financial interventions was GBP 1,202.8 billion or 74.9 percent of GDP.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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