Economy shows lower public sector borrowing |
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Mon, 23 May 2005 19:35
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Public Sector Net Borrowing (PSNB) revealed an unexpected figure of £1.3bn in April, which was considerably lower than the estimated figure of £2.3bn as indicated by The Office for National Statistics (ONS).
A heady start for the Chancellor, Gordon Brown, the current financial year reflects incessant improvements in tax receipts. Current expenditure being £35.8bn, current receipts in April soared by 9 % to £37bn from last year.
The Treasury’s Budget growth predictions of 10% in the income tax and capital gain receipts segment exceeded by overall increase of 16.1%. As against April 2004, receipts from corporation and petroleum revenue tax was almost 9%, whereas value added tax escalated to £7bn.
George Buckley of Deutsche bank said: "It looks like there is reasonable receipts growth but the question remains whether that can continue in the future given weaker expectations for economic growth."
| Even though the borrowings are low, analysts feel that it is too early to forecast that Mr. Brown would meet his defined net borrowing of £32bn this year.
They simultaneously believe that he will have to put up taxes by almost £12 bn to abide by his “golden rule” which lucidly states that he may borrow only to invest with no intentions to fund current spending over the economic cycle.
However, Mr. Brown in his budget forecast did indicate that with a current deficit showcasing a figure of £6 billion, 2005 - 2006, he would “meet the rule” by a margin of £6 billion considering the consolidated surplus arising from the period 1999 to 2006.
Analysts on the other hand, strongly expect tax receipts to decline. Besides, they also opine that economic growth will not meet the government forecast.
City economists predict growth to be limited to 2.4% in both 2005 and 2006 rather than the 3-3.5% and 2.5-3% figures that Mr. Brown expects respectively.
On the other end, consumer borrowings for mortgage loan are bleak. However, gross mortgage seems to rise from £21.1bn in March, to £21.5bn in April, due to increased lending for new house purchases.
The Director General of CML, said: "It now seems clear the market has stabilized at its new lower level and we expect to see a continued soft landing as long as the Bank of England resists any new temptation to raise interest rates."
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