The UK is expected to miss its borrowing target of £95.5 billion this year, despite an increase in tax receipts suggesting positivity for the tax year ahead.
Income from tax receipts for the month of July were found to have risen by 5.1 percent to £17.4 billion, presumably thanks to quarterly corporation tax payments and income from self-employed workers.
However, receipts for the first four months of the year had fallen by 1.1 percent to £49.4 billion, according to the Office for National Statistics (ONS). Corporation tax payments had declined 4.8 percent to £6.6 billion, and are expected to be down 4.3 percent to £14.7 billion by the end of the financial year.
The Treasury is reported to have already borrowed £37 billion this year, putting it on well on the way to exceeding its borrowing target of £95.5 billion. The amount borrowed so far is also £1.8 billion more than that of the equivalent period last financial year.
Sumita Shah, public sector policy manager at ICAEW, said:[quote]The deficit for this month is smaller than the same point last year, but longer-term trends show that the government is failing to keep the deficit under control.”[/quote]
Meanwhile, it is reported that Britain’s debt pile has now grown to just under £1.3 trillion, an increase of £97.8 billion from July 2013. The amount is worth 76.5 percent of the country’s gross domestic product (GDP).
The Office for Budget Responsibility (OBR) has predicted that the Treasury will pay more than £1 billion a week in interest payments this year on its current debt, whilst experts worry that continued borrowing will hamper Britain’s economic recovery.
The OBR has also suggested there may be “downside risks” to income tax and national insurance receipts this year, thanks to weaker earnings growth and an increase in the personal allowance to £10,000.
However, VAT receipts, which are said to reflect growth trends faster than income tax, rose 3.9 percent in July to £10.3 billion. This took overall year-to-date receipts up to £40.4 billion.
Other positive indications from the data involved a recovery in the mortgage market. According to the ONS, revenues for the year are up by nearly 27 percent to £4.8 billion, with the increase entirely driven by property transactions, it says.
Public sector net borrowing (PSNB) also stood at £800 million in July, which is 100% lower than that of July 2013 and in line with economists’ forecasts.
However, this is excluding one-off payments made in regards to the Royal Mail’s pension plan and quantitative easing gilt coupon transfers.