Government spending this tax year to date has surpassed forecasts, and debt continues to rise, but this is partly allayed by increased tax receipts, according to recently released figures from the Office for National Statistics (ONS) and the Treasury.
Increased borrowing
According to the ONS, the government borrowed £6.9bn in the month of June, £2bn more than in June 2016. This outstrips predictions that the government would borrow £4.8bn in June.
Between April – June 2017, the first quarter of the tax year, the government borrowed £22.8bn which is £1.9bn more than the same period of 2016, widening the budget deficit by 8.9%.
The Office for Budget Responsibility (OBR) have predicted that in the year ending March 2018, public sector net borrowing will be £58.3bn compared to £46bn last year. The OBR says this is due to higher debt interest spending, changes to the timing of expenditure transfers to EU institutions and self-assessment receipts being depressed in 2017/18.
Part of the reason for increased public spending is the change in payment pattern to the EU, which meant the government paid a sum of £1.2bn last month – £700m higher than in June 2016.
Day to day spending by the government has also increased – 5.6% higher during the first quarter compared with an OBR forecast of 4.4% for 2017-18.
Increased tax revenue
Despite increased public spending and a 4% reduction in corporation tax compared with last year, revenues from most major taxes have been growing at a rate faster than the OBR forecast for the year 2017-2018.
For the first quarter tax receipts were 4.7% higher than the first quarter of 2016, exceeding the OBR’s forecast for growth of 2.8% over 2017-18 as a whole.
The only major tax not to show fast growth is VAT, as it is dependent on public spending, and grew 2.1% compared with the OBR’s forecast of 3.1%.
Rising debt
ONS’ research revealed that the public sector net debt (excluding public sector banks) was £1.75 trillion at the end of June 2017, equivalent to 87.4% of gross domestic product (GDP). This is an increase of £128.5 billion, or 3.6 % as a ratio of GDP, from June 2016.
A spokesperson for the Treasury said: “Our national debt, at £65,000 for every household, is still too high and leaves us vulnerable to any future shocks.”
“That is why we have a credible fiscal plan to get debt falling and deliver the sound public finances needed for a stronger economy and higher living standards”, the Treasury added.
These statistics come after mounting pressure on Chancellor Philip Hammond to ease austerity and spend more on the public sector, particularly with calls to remove the public pay sector gap. This will likely give the government fuel to refute such demands by contending there is not enough money in the Treasury to do so.