£500m increase lifts Government borrowing well above £12bn mark

Public sector net borrowing, excluding distortions such as bank bailouts and quantitative easing (QE) cash transfers, increased in June to £12.4bn from £11.9bn a year earlier, the Office for National Statistics (ONS) said.

However, including a £3.9bn transfer of QE cash from the Bank of England’s asset-buying drive, June’s deficit fell by £3.4bn year-on-year to £8.5bn.

The ONS also cast doubt on how much money the Government will claw back from Swiss bank accounts, knocking May’s £3.2bn estimate to just £342m in actual receipts.

There was some cheer for the Government as a further revision showed annual underlying public sector net borrowing fell by £2.1bn in the last financial year, reversing last month’s upward revision.

May’s borrowing figures were flattered by the £3.2bn estimate of Swiss taxes, but the ONS said yesterday that it is taking a “more cautious approach” on how much tax it will be able to recoup from Swiss accounts after fresh information from the Swiss Bankers Association. It will now record the Swiss cash only when it is received.

The Government struck a deal in January with Swiss authorities to recoup tax from UK residents’ bank accounts in the country.

Higher local government borrowing in June offset a 15.2 per cent rise in tax receipts from businesses and households to drive the underlying monthly deficit higher.