EU Economics

Chancellor suffers double blow as Government borrows more than expected

George Osborne
The Chancellor, George Osborne. Public sector net borrowing, excluding public sector banks, stood at £7.2bn in April.

The Chancellor suffered a double blow on Tuesday after official figures showed public borrowing was higher than expected in April, while the previous year’s deficit was also larger than first thought.

Public sector net borrowing, excluding public sector banks, stood at £7.2bn in April.

While this was £0.3bn lower than the deficit in April 2015, it was well above economists’ estimates of a fall to £6.4bn, despite the data showing a rise in income tax, stamp duty, national insurance and VAT receipts.

Alan Clarke, an economist at Scotiabank, described the figures as a “disappointing start to the year” as the Government attempts to reduce its borrowing bill to £55.5bn in 2016-17.

“To hit the Chancellor’s borrowing goal for this year we needed to see borrowing down by an average of £1.5bn per month compared with the same month a year ago so we are running behind schedule already,” he said.

The Office for National Statistics (ONS) also revised up the March borrowing figure to £6.7bn, from a previous estimate of £4.8bn.

This helped to push up the public sector’s total borrowing in the 2015-16 financial year to £76bn – £2bn higher than previously estimated and some way above the £72.2bn projected by the Office for Budget Responsibility (OBR) in March.

While public borrowing data are volatile and often revised, economists said the data unscored the challenge faced by George Osborne as the Government attempts to eliminate the deficit before the end of the decade.

“April’s bloated borrowing number provides an early sign that the Chancellor will struggle to reduce borrowing this year as much as set out in the Budget, let alone achieve a budget surplus by the end of this parliament,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Public sector net debt, excluding public sector banks, now stands at almost £1.6 trillion, or 83.3pc of gross domestic product (GDP).

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