First half of Fiscal Sees Decline in Public Sector Borrowing

In the first half of the financial year, the public borrowing remained in accordance with as projected by the Government, while there has been an increase in the revenue from taxes surpassing the expectations.

As per the figures revealed by Office for Budget Responsibility on Wednesday, in the first six months of the year, the public sector borrowing dropped by £3.9bn to £73.5bn, as compared to £77.4bn figure that was experienced the last year in the same period. For the complete year, the office has projected the borrowings to be around £149bn, lower than 2009-10 figure by £5.7bn.

“The big picture is that the figures are still running a little bit below the equivalent period of the previous financial year and, arithmetically at least, seem on course to meet the OBR’s forecast for 2010-11”, said Philip Shaw, economist at Investec.

The tax revenues for the first six months of the fiscal increased by 9.3%, beating OBR’s whole year forecast of 6.3%. In the same period, the spending mounted up 6.7%, overlooking the yearly forecast of 6.1%.

But, in September, the revenues advanced by 7.6%, comparatively less, as compared to the previous months, but the spending climbed up 10.2%. This was contributed by the Government’s net borrowing of £16.2bn, high from last year’s figure of £15.5bn and more than what economists have expected.

The increase in the interest payments on Government debt in September also triggered more spending. In the first half of fiscal, interest payment rose 80% to £21.6bn, more than the forecast of 40.1%.