The chancellor, George Osborne, faces a battle to hit this year's borrowing target after the government posted a surprise deficit in the public finances in July.
Economists had expected a small surplus of £50m in one of the strongest months of the year for tax receipts, but an increase in government spending resulted in the state posting a deficit of £239m instead.
In the tax year so far, the government has borrowed £32.4bn, £9.4bn more than at the same point last year according to the Office for National Statistics data. Stripping out the impact of cash transfers from the Bank of England, the government has borrowed £37bn this year.
At the time of the March budget, the Office for Budget Responsibility – the Treasury's independent forecaster – predicted a fall in borrowing in 2014-15 to £95.5bn, from £105.8bn in 2013-14.
Sam Hill, senior UK economist at RBC Capital Markets, said that target was beginning to look more challenging: "The government borrowed money again in July, despite the benefit of this being a seasonally strong month of the year for receipts.
From here, the deficit target is looking tougher to meet than the government would have hoped for, or expected, given the performance of the economy."
The annual comparison is unflattering partly because of higher-than-usual income tax payments early last year, which were the result of tax changes. The figures last year were also boosted by receipts from a Swiss tax avoidance deal.
The Treasury insisted it was still on track to meet its full-year targets: "[The] public sector net borrowing figures continue to be in line with the budget forecast, which predicts the deficit to have halved by the end of this year."
Over the first four months of the tax year, government tax receipts were 2.1% higher than the same period a year ago, while government spending was up 1.3%.
Soumaya Keynes at the Institute for Fiscal Studies said there was still a good chance Osborne would be able to meet his full-year target once the unfavourable comparisons from earlier in the tax year dropped out.
"On the face of it, [higher borrowing in the first four months of the year] is bad news for George Osborne's prospects of achieving the £10bn drop in borrowing that has been forecast by the OBR for the year as a whole.But a closer look at the figures suggests that things may not be as gloomy as they first appear.
"The higher levels of borrowing have been driven by weak growth in tax receipts – in particular, receipts of income tax, capital gains tax and National Insurance contributions. But this is in large part a timing effect that will unwind later in the year."
Publishing its own analysis of the July borrowing figures, the OBR said that self assessment payments should boost tax receipts in January and February 2015, improving the full-year picture, but added that weaker-than-expected wage growth is also likely to affect income tax payments and national insurance contributions.
James Knightley, economist at ING, said the borrowing figures for the year so far were disappointing.
"This suggests that the Office for Budget Responsibility's full-year forecast is going to be difficult to hit, meaning that the chancellor is probably going to have little room to offer a big pre-election giveaway next year.
theguardian.com
Economists had expected a small surplus of £50m in one of the strongest months of the year for tax receipts, but an increase in government spending resulted in the state posting a deficit of £239m instead.
In the tax year so far, the government has borrowed £32.4bn, £9.4bn more than at the same point last year according to the Office for National Statistics data. Stripping out the impact of cash transfers from the Bank of England, the government has borrowed £37bn this year.
At the time of the March budget, the Office for Budget Responsibility – the Treasury's independent forecaster – predicted a fall in borrowing in 2014-15 to £95.5bn, from £105.8bn in 2013-14.
Sam Hill, senior UK economist at RBC Capital Markets, said that target was beginning to look more challenging: "The government borrowed money again in July, despite the benefit of this being a seasonally strong month of the year for receipts.
From here, the deficit target is looking tougher to meet than the government would have hoped for, or expected, given the performance of the economy."
The annual comparison is unflattering partly because of higher-than-usual income tax payments early last year, which were the result of tax changes. The figures last year were also boosted by receipts from a Swiss tax avoidance deal.
The Treasury insisted it was still on track to meet its full-year targets: "[The] public sector net borrowing figures continue to be in line with the budget forecast, which predicts the deficit to have halved by the end of this year."
Over the first four months of the tax year, government tax receipts were 2.1% higher than the same period a year ago, while government spending was up 1.3%.
Soumaya Keynes at the Institute for Fiscal Studies said there was still a good chance Osborne would be able to meet his full-year target once the unfavourable comparisons from earlier in the tax year dropped out.
"On the face of it, [higher borrowing in the first four months of the year] is bad news for George Osborne's prospects of achieving the £10bn drop in borrowing that has been forecast by the OBR for the year as a whole.But a closer look at the figures suggests that things may not be as gloomy as they first appear.
"The higher levels of borrowing have been driven by weak growth in tax receipts – in particular, receipts of income tax, capital gains tax and National Insurance contributions. But this is in large part a timing effect that will unwind later in the year."
Publishing its own analysis of the July borrowing figures, the OBR said that self assessment payments should boost tax receipts in January and February 2015, improving the full-year picture, but added that weaker-than-expected wage growth is also likely to affect income tax payments and national insurance contributions.
James Knightley, economist at ING, said the borrowing figures for the year so far were disappointing.
"This suggests that the Office for Budget Responsibility's full-year forecast is going to be difficult to hit, meaning that the chancellor is probably going to have little room to offer a big pre-election giveaway next year.
theguardian.com
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