Official figures released by the Office for National Statistics (ONS) this morning provide a boost to the government as they show that the provisional estimates for public sector borrowing in October was lower than expected.
The UK government borrowed £6.5 billion in October. The total net debt for the UK rose to £966.6 billion, equivalent to 62.3 per cent of GDP. The borrowing figure for October 2010 was £7.7 billion.
The total public sector net borrowing requirement (PSNBR) excluding financial interventions has now reached £68.3 billion in the first seven months of this year, down from £78.7 billion in the same period last year.
The borrowing figures were slightly lower than expected as tax revenue outstripped new spending commitments. The release follows David Cameron’s speech to the CBI in which he admitted that cutting the deficit was proving much harder than the government had expected.
The figures also provide a fillip for George Osborne ahead of his autumn budget statement that he will make next week. The figures show a slight improvement on 2010.
Howard Archer, Chief UK & European Economist at IHS Global Insight said: “Based on the first seven months of fiscal 2011/12, the Chancellor is actually on course to slightly better his full year targets.
“However, the serious weakness of the economy and rising job losses suggest that Mr. Osborne still faces a tough battle to limit the PSNBR to £122 billion as planned in 2011/12.”
However, with the government desperately searching for ways to stimulate the economy which has led to announcements of new spending initiatives, it appears unlikely that the government will meet its target of cutting the deficit by 2014-15 unless it introduces new taxes or further spending cuts, which would seem unlikely at the moment when the pressures UK households are under is taken into consideration.
Mr Archer said that based on current figures the Chancellor will meet his borrowing target for 2011-12 but continued economic pressures that are likely to lower expected tax revenue and increase government spending through extra unemployment claims could make this unlikely.
He said: “If the overall performance of the first seven months was replicated through the rest of the fiscal year, the PSNBR would come in at £119 billion in 2011/12, which is actually modestly below the targeted £122 billion.”
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