Government hit by fiscal deficits, situation deteriorating |
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Fri, 22 Jul 2005 00:35
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LONDON: The U.K. government's first quarter fiscal position has deteriorated, according to figures compiled by the Office of the National Statistics. Public sector net borrowing, the yardstick for public finances, stood at 5.9 billion pounds in June, compared with 4.4 billion pounds in the same period last year.
The overall deficit in the first quarter of the fiscal stands at 17 billion pounds against last year's 13.3 billion pounds.
Chancellor of the Exchequer Gordon Brown had projected that the net borrowings for 2005-2006 will be 31.9 billion pounds as against 36.9 billion pounds recorded in the previous year.
Brown had come out with a controversial contention Wednesday saying the current economic cycle had started in 1997, two years earlier than previously thought. This would mean that the Treasury can include an some 9 billion pounds of surpluses to cover deficits posted in the last couple of years.
This has led to charges that Brown is manipulating fiscal rules.
The ONS figures show that the budget figures in in June stood at 4.7 billion pounds against 3.5 billion pounds last year.
The government's borrowing has also reached a record level for June with the public sector net cash requirement reaching 12.3 billion pounds, the highest figure for June since 1984. This is higher than expectations of a 10.5 billion pounds gap and last year's equivalent of 10.7 billion pounds.
The ONS also indicated that net debt at June-end stood at 430.8 billion pounds, an equivalent of 35.3 per cent of GDP.
Brown's critics say his interpretation of the start of the economic cycle has kept him from going into the red on the key criterion of his "golden rule", which states that the current budget must be in surplus over the economic cycle.
Brown would have been compelled to raise taxes in the next Budget or cut spending to avert the risk of breaking his self-imposed golden rule.
Said George Osborne, shadow chancellor, "Yesterday Gordon Brown shifted the goalposts for the golden rule. The timing was very convenient for the chancellor. If he hadn't cheated the system, we would be seeing the golden rule in deficit for the first time."
June is not considered a significant month for tax receipts and hence analysts feel it is too early to draw firm conclusions about its out-turn.
Brown has not changed his growth forecasts in response to last month's official data revisions. This indicates that economic growth had slowed more sharply than previously thought.
The Treasury brought out the first compilation of independent economists' forecasts since last month's revisions. It indicated an average forecast for economic growth in 2005 of 2.2 per cent. This was down on June's 2.5 per cent.
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