Shock for City as Britain posts £62 million deficit for July
George Osborne's plans to cut Britain's deficit at a faster rate hit by 'small, but unexpected' shortfall
GEORGE OSBORNE’S ambition to cut Britain’s deficit at a faster rate on the back of a recovering economy has been dealt a blow by a £62 million shortfall in July’s accounts. Despite signs the economy is strengthening, the UK recorded this “small, but unexpected” deficit.
The shortfall is in stark contrast to the £800 million surplus posted in July last year and appears to have taken the finance sector by surprise. The City had been predicting a £2.5 billion surplus, driven by the rapidly improving economic outlook, reports The Independent.
Commentators said the deficit was particularly disappointing because the Treasury is usually in credit at this time of the year. July is traditionally the second-strongest month of the year for the public finances due to an influx of tax payments from companies and self-assessed individuals.
Tax receipts for July were 3.4 per cent higher than in July 2012, but they were undermined by a 3.7 per cent rise in government spending.
Treasury sources told The Independent the high spending was due to a change in the timing of payments to the health, education and overseas aid departments. They insisted that departments were sticking to their budgets and that over the course of the full year the effect of the change in the timing of outlays would be neutral.
Even so, Osborne’s hopes of “making faster inroads into the deficit” on the back of a recovering economy are on hold. Excluding various one-offs, government borrowing for the financial year to date has been £36.8 billion, up from £35.2 billion in the same period of 2012/13.
Martin Beck, UK economist at consultancy Capital Economics, told Sky News the figures highlighted that the public purse has "yet to benefit from the economic upturn".
He said: "While signs of economic recovery should eventually feed through into an improvement in the public finances, it looks like the Chancellor will have to wait a while yet." ·