The U.K. budget deficit narrowed in May as new tax cooperation deal with Swiss authorities boosted government coffers with one-off payments.
Public sector net borrowing excluding financial interventions fell to GBP 8.8 billion in May from GBP 15.6 billion in the previous year, data published by the Office for National Statistics showed Friday.
PSNB excluding the effects of transfers from the Bank of England Asset Purchase Facility totaled GBP 12.7 billion, down from GBP 15.6 billion last year.
The ONS said budget deficit was reduced by GBP 3.9 billion from transfers from the Bank of England Asset Purchase Facility Fund and GBP 3.2 billion from retrospective tax payments by Swiss banks.
The ONS, however, cautioned that GBP 3.2 billion payment to be received from Switzerland, is estimated by the Office for Budget Responsibility. It is anticipated to arrive over the coming year and the final value of receipts may differ.
Chief U.K. Economist at IHS Global Insight Howard Archer said it currently looks increasingly likely that Chancellor George Osborne will meet his fiscal targets for 2013/14 and could very well undershoot them.
But Vicky Redwood at Capital Economics said the improvement in the public finances was due to temporary factors. The big picture is that years of austerity still lie ahead, as will be underlined by next Wednesday's Spending Review.
In the Spending Review, Osborne expected to outline GBP 11.5 billion cuts to government departments for the fiscal year 2015-16.
The deficit in the fiscal year ended March increased marginally to GBP 118.8 billion, from GBP 118.5 billion in 2011-12.
Public sector net debt ex-temporary effects of financial interventions was GBP 1.19 trillion at the end of May, equivalent to 75.2 percent of gross domestic product, data showed.
Due to a decrease in department spending, government expenditure declined 4.5 percent in May from the prior year. Meanwhile, tax receipts advanced 21 percent.
For comments and feedback: editorial@rttnews.com