LONDON: George Osborne is on track to cut the annual budget deficit by more than previously forecast after a block on spending and a jump in tax receipts in May.
The Office for National Statistics said government borrowing last month dropped to £10.1bn, the lowest since 2007, from £12.3bn in May last year – an 18% fall. The total stock of debt, excluding public sector banks, was £1.5tn or 80.8% of GDP, an increase of £83.2bn compared with May 2014.
Income tax and VAT receipts increased by more than 5% while government spending rose by just 0.1%. The government’s already diminished investment budget was reduced by 8.7% to £200m, the ONS said.
The fall in the monthly budget deficit means the government could beat the prediction of a 14% drop in the annual deficit in this financial year made by the Office for Budget Responsibility.
However, the chancellor is expected to press ahead with steep cuts to welfare budgets and Whitehall in his budget on 8 July.
A Treasury spokesman said: “We have more than halved the deficit, but at just under 5% it is still one of the highest in the developed world. We’ve learnt that there is no shortcut to fixing the public finances.
So that is why we will bring forward a strong new fiscal framework at the budget to entrench a permanent commitment to run a budget surplus in normal times, and the budget responsibility it represents,” he said.
Alan Clarke, UK economist at Scotia Bank, said that any plaudits for the chancellor should be muted by figures that were largely based on forecasts rater than actual cash in and out of the government’s ledger book.
He said: “Clearly things could prove to have been front-loaded and the good performance could taper off. But the message is “so far so good”.
