A report on Tuesday that UK borrowing rose 10% more than planned in the six months to September suggests that the UK's recovering economy will not head off the need for further austerity while a promised tax cut in the next parliament maybe at risk.
Borrowing in September was £11.8bn, £1.6bn higher than in September 2013 while in the first six months of the tax year, between April and September, borrowing was £58bn, up £5.4bn on the first half of last year, according to the Office for National Statistics.
Howard Archer, chief UK economist at IHS Global Insight, said: “The chancellor is looking ever more unlikely to meet his fiscal targets for 2014/15. This means that Mr Osborne faces an awkward fiscal backdrop as he announces his autumn statement in December as the May 2015 general election draws ever nearer. This gives him little scope to announce any major sweeteners.”
The Office for National Statistics reported [pdf]:
- Public sector net borrowing excluding public sector banks (PSNB ex) from April to September 2014 was £58.0bn, an increase of £5.4bn compared with the same period in 2013/14.
- PSNB ex was £11.8bn in September 2014, an increase of £1.6bn compared with September 2013.
- Due to the volatility of the monthly data, the cumulative year-to-date borrowing figures provide a better indication of the progress of the public finances than the individual months.
- The central government net cash requirement (CGNCR) from April to September 2014 was £58.0bn, an increase of £14.9bn compared with the same period in 2013/14.
- Public sector net debt excluding public sector banks (PSND ex) was £1,451.3bn (79.9% of GDP) in September 2014, an increase of £100.7bn compared with September 2013.
- Maastricht debt (General Government Gross Debt) at the end of September 2014 was £1,557.5bn and Maastricht deficit (General Government Net Borrowing) in 2013/14 was £101.1bn.
The Office for Budget Responsibility, the government's independent forecaster, said: "Receipts growth of 2.4% for the first half of 2014-15 is well below the full-year forecast of a little under 5%. Some of this reflects the timing of receipts through the financial year. Last year’s shifting of PAYE liabilities in response to the reduction in the additional rate of income tax depressed receipts growth in the early part of 2014-15. We also expect a sizeable boost to self-assessment (SA) receipts at the end of January 2015 when the balancing payment for 2013-14 liabilities is made, again reflecting the shifting of liabilities related to the additional rate.
There are however a number of factors that mean that receipts growth for the whole of 2014-15 may be lower than forecast in the March EFO (economic and fiscal outlook): weaker-than-expected wage growth so far in 2014-15 appears to be depressing PAYE and NIC (national insurance contributions) receipts. Unexpectedly weak earnings growth and strong employment growth also mean that a greater proportion of wages and salaries will be subject to the £10,000 personal allowance, reducing the effective tax rate on labour income. Accrued PAYE and NIC were up 2.0% and 1.0% for the year-to-date, compared with full-year forecasts of 3.5% and 2.5% respectively."
George Osborne, the chancellor, has said he will balance the public finances in the next parliament without any new tax rises and that he would then introduce a £7.2bn income tax cut.
Income tax related receipts were effectively flat, growing 0.1% or £100m despite a jump in employment - however, significant part-time and self employment coupled with falling real wages has not produced a tax bonanza.
The Guardian reports that average monthly wage for employees of FTSE 350 companies increased by 8p over the three months to September, compared with last year, according to Vocalink, which processes salary payments for more than 90% of the British workforce.