Borrowing falls to 2008 levels

Public sector borrowing fell by £800 million last month to reach its lowest level for any June since 2008, according to official figures.

George Osborne

The Office for National Statistics (ONS) said borrowing - excluding the effect of bank bailouts - was £9.4 billion in June.

It was the first set of public sector finance figures since Chancellor George Osborne’s summer Budget two weeks ago - which saw independent forecasts pencil in an improved projection for the current fiscal year.

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Treasury coffers were boosted last month by a rise in income tax receipts to £11.5 billion, the best June performance on record since 1997.

It follows a period in which the income tax take had failed to grow by as much as expected despite the strength of the UK’s economic recovery, though it now appears to be making strides.

Meanwhile the corporation tax take of £1.7 billion also represented the best June on record.

The monthly figures also saw a £117 million boost from a fine paid by Lloyds Banking Group over its handling of payment protection insurance (PPI) complaints.

Latest forecasts from the Office for Budget Responsibility (OBR) suggest underlying borrowing for 2015/16 will fall to £69.5 billion from £88.2 billion in 2014/15, a fall of 21.2 per cent.

For the fiscal year to date from April to June this year, borrowing stands at £25.1 billion, £6.1 billion lower than a year earlier and the lowest year-to-date borrowing for the period since 2008/9.

However the improvement of 19.6 per cent is slightly behind the scale pencilled in by the OBR.

Underlying debt stood at £1.51 trillion, the highest on record. As a percentage of gross domestic product (GDP) it was 81.5 per cent, just behind last December’s record high of 81.6 per cent.

The level was swollen after figures took account of the worse-than-expected state of Government-owned Network Rail’s balance sheet, which added £100 million to national debt for 2014/15.

A Treasury spokesman said: “Today’s figures show that our deficit reduction plan is working, with cumulative borrowing over £6 billion lower than at this point last year.

“We have more than halved the deficit, but with debt over 80 per cent of GDP the job is not done.

“That is why we will continue to work through our long-term plan to achieve a budget surplus in normal times and secure a better economic future for working people.”

While the Government claims it has halved the deficit, this relates to borrowing as a percentage of GDP since 2010 rather than the level of borrowing itself.

Samuel Tombs of Capital Economics pointed out that the fall in borrowing for June was just 8 per cent, compared with the OBR’s target for the deficit to fall at nearly three times that pace.

He said if the trend persisted, the 2015/16 borrowing figure would miss the forecast by £2 billion.

“However, estimates for borrowing in the first few months of the fiscal year should be taken with a pinch of salt,” he added.

“Accordingly, we do not think that June’s borrowing figures should ring any alarm bells yet.”

Howard Archer of IHS Global Insight said: “While June’s improvement was slightly less than had been expected, Chancellor George Osborne is still likely be pleased to see the shortfall on the public finances narrow for a sixth month running.”

Shadow chancellor Chris Leslie said: “Today’s update cannot hide George Osborne’s broken promise on the deficit or the fact the national debt now stands at £1.51 trillion.”