LONDON: Strong income tax receipts pushed British government borrowing to its lowest May reading since 2007, adding to signs that revenue growth could play a major role in debt-reduction plans being drafted by finance minister George Osborne. The budget deficit fell to 10.1 billion pounds ($16.05 billion) from 12.4 billion pounds a year earlier, a smaller gap than economists had forecast.
After an unexpected outright election victory last month for the Conservative party to which Osborne belongs, he has said he will use a budget statement on July 8 to set out plans to commit future governments to run budget surpluses during normal economic times. That is something with little precedent in post-war Britain, and it could help reduce public debt faster after it to reach a record 1.5 trillion pounds in May, more than 80 percent of gross domestic product.
Osborne says debt needs to fall substantially as a share of GDP before another financial crisis hits Britain, though economists at the International Monetary Fund and OECD have questioned how fast this should be done. Either way, it may not be enough to save Britain’s last remaining triple-A sovereign rating, which Standard & Poor’s put on a negative outlook last week because the Conservatives’ plan to hold a referendum by the end of 2017 on whether to stay in the European Union risked damaging the economy. “With a long way to go in order to restore the public finances to better health, a major reintensification of the fiscal squeeze is looming,” analyst Paul Hollingsworth at Capital Economics said.
