Economy: Borrowing rise shock for Osborne

Chancellor George Osborne’s deficit reduction plans were dealt a blow today when official figures revealed a shock rise in borrowing in July.

Public sector net borrowing, excluding financial interventions such as bank bailouts, came in at £600 million in July, compared with a surplus of £2.8 billion in the same month last year, dashing the City’s expectations of a surplus of £2.5 billion.

July is normally a strong month for tax income for the Treasury, but total receipts fell 0.8%, driven by a drop in corporation tax, while Government spending increased 5.1%.

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In a further blow to the Chancellor, net borrowing for April to June, was revised up by £1.4 billion.

That means borrowing so far this year, excluding a one-off boost after assets from the Royal Mail’s pension fund was transferred to the Treasury, is £44.9 billion, £9.3 billion higher than a year ago.

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