UK borrow less than thought but Hunt vows more budget discipline
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UK borrowing comes in lower than expected in June
ONS revises down borrowing in first 3 months of tax year
Hunt promises to keep a grip on public finances
Tax increases help to boost government revenues
By William Schomberg
LONDON, July 21 (Reuters) – Britain borrowed less than expected in the first three months of the financial year, helped by big government tax hikes, data showed on Friday, but finance minister Jeremy Hunt said he would not relax his grip on the public finances.
Britain recorded a budget deficit of 18.5 billion pounds ($23.8 billion) in June, down by 0.4 billion pounds from the same month last year, the Office for National Statistics said. A Reuters poll of economists had pointed to public sector net borrowing, excluding state-owned banks, of 22 billion pounds last month.
The ONS said higher tax receipts and a big fall in government debt interest compared with June 2022 were largely offset by increased benefit payments and other costs. The June deficit took borrowing in the first three months of the 2023/24 financial year to 54.4 billion pounds, 12.2 billion pounds more than in the same period last year but 7.5 billion less than expected by Britain’s budget forecasters.
The ONS said it had revised down its April-May borrowing estimate by 7 billion pounds as tax revenues – which have been increased by hefty tax hikes announced by the government in November last year – came in stronger than first thought.
Rapid inflation has also played a big role, with value-added tax receipts up 9% this financial year compared with a year ago, despite no increase in the underlying tax rate.
The COVID-19 pandemic period caused government borrowing to soar and public debt has climbed above 100% of gross domestic product, hitting levels not seen since World War Two to stand at 100.8% of gross domestic product in June.
Finance minister Jeremy Hunt and Prime Minister Rishi Sunak have so far resisted calls for tax cuts from lawmakers within their Conservative Party ahead of a national election expected in 2024 which opinion polls suggest they will lose.
“Now more than ever we need to maintain discipline with the public finances,” Hunt said after Friday’s borrowing figures. “We are at a crucial juncture and need to avoid reckless spending. As this week’s fall in inflation showed, we will start to see results if we stick to our plan to halve inflation, grow the economy and get debt falling.”
Samuel Tombs, an economist with Pantheon Macroeconomics, said the better news on recent public borrowing would not be celebrated much at the Treasury as the outlook for debt interest payments had got a lot worse. “We continue to think that the Chancellor will not have scope to cut taxes meaningfully before the next general election,” Tombs said.
