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U.K. Logs Biggest August Budgetary Deficit Since 2012

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U.K. budget balance showed its biggest shortfall for August in three years as tax revenue declined from last year, data published by the Office for National Statistics showed Tuesday.

Public sector net borrowing excluding public sector banks increased by GBP 1.4 billion from last year to GBP 12.1 billion in August.

This was the largest deficit for August since 2012. Economists had forecast the deficit to widen to GBP 9.2 billion.

The budget balance for July was revised to show a deficit of GBP 706 million instead of the GBP 1.3 billion surplus estimated initially.

In August, central government net borrowing rose by GBP 1.6 billion. At the same time, central government receipts decreased by GBP 0.3 billion.

Data showed that corporation tax fell 14.1 percent and income tax related payments by 3.5 percent reflecting a decrease in self-assessment payments in August.

Hopefully this will just be a temporary blip, as tax receipts should be feeling the benefits of the recent strength of the economic recovery, Vicky Redwood, chief UK economist at Capital Economics, said.

There is yet time for things to get back on track before the Chancellor's Autumn Statement on November 25, she said.

During April to August, public sector net borrowing excluding public sector banks decreased by GBP 4.4 billion to GBP 38.4 billion, which was equivalent to 1.9 percent of gross domestic product.

This decrease in borrowing was largely due to a GBP 5.5 billion decline in central government net borrowing.

IHS Global Insight Economist Howard Archer said the fiscal targets for 2015/16 look much harder for Chancellor George Osborne to achieve than they did only a month ago. Osborne aimed to cut the deficit to GBP 69.5 billion or 3.7 percent of GDP.

At the end of August, public sector net debt totaled GBP 1,505.5 billion, equal to 80.6 percent of GDP.

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