New analysis of today’s public borrowing figures reveals that the deficit is on course to be over £6bn higher by the end of this year compared to last, meaning that overall government borrowing looks set to rise and yet more spending cuts may be necessary to get the public finances back on track.
The analysis, by the think tank the Social Market Foundation, shows that marginally improved borrowing figures for January 2013 will not be enough to offset the low take from the 4G spectrum auction revealed yesterday and the disappointing borrowing figures in November and December.
The think tank has projected forward the likely borrowing figures for the remaining two months of the financial year. Key findings include:
- Comparable borrowing so far this year is tracking at around 7% higher than this time last year;
- borrowing for 2012/13 is likely to be £125.7bn once the gains from the Royal Mail pensions plan and Bank of England Asset Purchase facility are stripped out;
- this compares to borrowing of £119.6bn last year;
- the total overshoot, if current trends continue, is likely to be £6.1bn;
- the projected overshoot dwarfs yesterday’s 4G auction shortfall and the deficit is likely to rise whether or not the 4G receipts are included.
The rise in borrowing is likely to mean a bigger black hole in the public finances than the Office for Budget Responsibility predicted back in December, raising the prospect of yet more spending cuts.
Commenting on the figures, SMF Director Ian Mulheirn said:
“January is traditionally a strong month for the public finances, as strong income tax receipts mean that the Government usually makes a repayment. While this year’s public sector borrowing figures were a slight improvement on last year, once we strip out the effect of the Chancellor’s coupon raid on the Bank of England, they were not good enough to make it likely that borrowing will fall this year.
“The Chancellor made great play at the Autumn Statement of his claim that government borrowing will fall this year. He now needs a dramatic turn-around in February and March if he’s to avoid having to eat his words.
“Putting politics aside, the troubling question is how much of this unexpected borrowing is temporary and how much it implies even more public spending cuts or tax rises down the track.”