Public sector net borrowing in July was £100m, compared with an £800m surplus in the same month last year
The Treasury ran up a rare July deficit last month, raising doubts about the coalition's progress in tackling the black hole in Britain's public finances.
July traditionally sees a surplus as it is a strong month for tax receipts, with quarterly corporation tax payments due. But the Office for National Statistics said the government had to borrow £100m last month, compared with the £800m surplus it ran up in the same month last year.
Once the boost from banking the proceeds of the government's quantitative easing programme were excluded, the deficit increased to £500m.
Taking the first four months of the financial year together, the underlying picture was of a £36.8bn shortfall, up from £35.2bn over the same period in 2012-13.
That was an increase of 4.7% – a larger rise than the independent Office for Budget Responsibility (OBR) is expecting for the fiscal year as a whole.
Chris Leslie, shadow financial secretary to the Treasury, said: "Another month of disappointing figures raises very serious concerns that borrowing continues to be way off track." He said a future Labour government would "make different choices and work for a strong and sustained recovery which delivers on living standards for the many. That's the way to get the deficit down and do so in a fairer and more balanced way".
However, the Treasury insisted the figures should not be taken as evidence that its deficit-busting strategy is failing, stressing that one-off factors had affected the figures.
Unusually large transfers to Whitehall departments including health and international development took place in July, it said, and a change to the way local authorities are funded had also skewed the results.
With growing evidence that the economy is starting to pick up, after flirting with recession at the turn of the year, the Treasury is hoping that stronger growth will boost tax revenues and ease the pain of tackling the deficit.
Tax revenues in July were £2.2bn higher than last year, a 4.2% rise to £54.4bn, the ONS said.
A Treasury spokeswoman said: "Strong tax receipts in July confirm that the economy is moving from rescue to recovery.
"There is still a long way to go as the UK recovers from the biggest economic crisis in living memory, and the government is sticking to the economic plan that has already cut the deficit by a third and enabled the private sector to create over 1.3 million new jobs."
She added that once volatile North Sea oil taxes were excluded, corporation tax receipts were 10% higher in July than a year earlier.
Peter Dixon, UK economist at Commerzbank, said: "All in all, it's only a very small deficit, we're not going to get too carried away about it. At this stage, we are probably on track to meet the government's forecasts for the year as a whole, but the UK still has a lot of work to do to get its finances back in order."
The ONS also published its latest estimate of last year's public finance totals, which showed public sector net borrowing for 2012-13 as a whole, excluding temporary factors, at £116.5bn – £2bn lower than a year earlier, and stronger than the £120.9bn deficit expected by the OBR in its latest forecast.
That means George Osborne can argue that he continued to make at least some progress in deficit reduction last year, despite the fragile state of the economy.
However, with the Exchequer still running up deficits, Britain's national debt has continued to rise. The ONS said it hit £1.19tn at the end of July – equivalent to 74.5% of GDP.
When he delivered his first "emergency" budget in June 2010, the chancellor said he expected public sector debt to peak at 70.3% of GDP this year.
Article Source : http://www.guardian.co.uk
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