Budget deficit surges, Chancellor unperturbed |
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Tue, 21 Jun 2005 07:05
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London: The UK budget deficit for the month of May crossed record levels even as the governments borrowings surged onward and upward. This has lead to a widespread feeling that Chancellor Gordon Brown might not be able to meet his borrowing forecast for the year.
The Office for National Statistics' figures for the month of May show that public sector net borrowing (PSNB) was 8.735 billion pounds in May. This is the highest recorded monthly total since comparable records began in April 1993. This means that the government expenditure is increasing exponentially as compared to the receipts.
Analysts say that Gordon Brown will have to raise the taxes to meet this shortfall. Alan Clarke, economist at BNP Paribas, commented, "Taking the two months together we have got a deficit that is broadly what we had for the first two months of the last financial year. But the difference is that last year's deficit is somewhat higher than what Gordon Brown is going for this year, so he does have a bit of a mountain to climb to reach his target."
| Jonathan Loynes, of Capital Economics, said, "We know there has been a visible deterioration in the public finances because the Government is now running a deficit. What concerns me is that there has been an invisible one too because of the hundreds of public finance initiatives signed in recent years. I think the Treasury should be more transparent about this rather than asking everyone to ferret around in funny places."
But the Treasury appeared to be unruffled at this report, a spokesman said; "Central government spending in May was higher than last year -- in large part because of a boost in education. But with spending growth over the first two months controlled at just 4.9 percent -- lower than forecast in the Budget -- we continue to meet our fiscal rules."
But Howard Archer, economist with Global Insight pointed out that based on the current figures Significant corrective action appeared to be inevitable in next year's Budget, "The main question is to what extent will the Chancellor risks tightening fiscal policy if the economy is still struggling to regain upward momentum?" he said.
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