Government borrowing spikes as tax receipts slump
Shortfall in corporation tax receipts blamed for £600m rise in government borrowing in July
DISSAPOINTING corporation tax receipts have been blamed for an unexpected rise in government borrowing.
Public sector borrowing, excluding bank bailouts, rose by £600m in July, compared to a £2.8bn surplus in the same month last year.
The surprising rise in borrowing, which dealt a blow to chancellor George Osborne’s deficit reduction plans, was attributed to a fall in total tax receipts.
The timing of corporation tax payments means that July is usually the second highest month for receipts during the financial year and so typically sees a budget surplus. However, total receipts fell 0.8%, driven by a 19.3% decline (or £1.7bn shortfall) in corporation tax.
“While it looks likely that corporation tax receipts will fall short of our March forecast, the other main receipts streams remain closer to forecast,” said the Office for Budget Responsibility.
The OBR said this month’s figures had been skewed by “particularly weak” tax receipts from oil and gas producers as a result of the temporary closure of the Elgin gas field because of a leak.
“It’s the same story we’ve been seeing since the beginning of the year – that tax receipts are down, which is not surprising given the weaker growth performance of the economy,” said Gustavo Bagattini from RBC Capital Markets.