Chancellor's deficit cuts in danger as tax take drops
Total borrowing climbs above £1tn as key tax revenues fall
FEEBLE GROWTH and dropping revenues are threatening the chancellor’s attempts to cut the deficit after it emerged the government’s tax take is down.
The Treasury narrowly kept within the Office for Budget Responsibility’s guideline of £126bn, in spite of borrowing £18.2bn in March. Official figures show a contraction on key tax figures, an ominous trend for the coming year.
Income tax revenue fell by 3.9% to £12.9bn and VAT receipts were down 1% to £9.4bn, while central government spending is up 4.2% year-on-year and total debt tipped over the £1tn mark.
The OBR said the drop in income tax returns was a result of the fall in financial sector bonuses, while corporation tax receipts were depressed by unusually large repayments and accrued VAT receipts were flat on a year ago.
Daniel Soloman of the Centre for Economics and Business Research told the Evening Standard: “The fly in Mr Osborne’s debt-reduction ointment will probably be slow GDP growth.
“This is a problem for the government’s debt-reduction strategy because slow growthgoes hand-in-hand with comparatively modest tax takings.”