The government's plan to cut the deficit (the annual government overspend) has hit a setback. The government borrowed £11.4bn in June, only marginally less than in June 2013.
April and May also saw big deficits, leaving borrowing in the first three months of the 2014-2015 tax year 7% higher than in the same period last year.
Yet, the Office for Budget Responsibility expects borrowing to be 10% lower in 2014-2015 as a whole, so this is hardly a promising start. The overall debt pile has risen to a new record above £1.3trn, 77.3% of GDP.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
What the commentators said
Don't rule out another fiscal crisis, said Allister Heath in The Daily Telegraph. The deficit is still "extraordinarily high by historic standards": it reached 6.6% in 2013-2014, down from 11.3% at the height of the recession.
The current "snail-like" pace of consolidation implies the budget won't balance until 2019. So "if anything at all goes wrong" over the next few years Russia or China triggering a global slowdown, say, or a new government turning the spending taps on again Britain's creditors could start to worry about borrowing hurtling out of control.
The immediate problem is that spending is being cut too slowly, while tax receipts are "remarkably subdued" for such a supposedly strong recovery. While there are more people in work than ever, falling productivityis keeping wages, and hence incometax, subdued.
There are grounds for optimism on this front, however, said Capital Economics. A key problem for productivity has been a lack of business investment, but this is now rising it is up by 10% year-on-year and the latest data suggest it will be "stellar in the near term". Surveys covering salaries are pointing to above-inflation pay rises later this year. It's too soon to panic about the public finances.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
