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Britain faces more cuts as tax revenues fall short

22 August 2012   (0 Comments)
Posted by: SAIT Technical
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By Sven Egenter and David Milliken (Independent/Reuters)

BRITAIN'S public finances veered further off track in July after a shortfall in corporation tax revenues and higher spending, putting the government's deficit goals in doubt and raising the prospect of more austerity on top of the planned spending cuts.

After nine months of recession, the unexpected deficit underscored the lack of scope for chancellor George Osborneto give a meaningful boost to the economy -- which looked at increased risk of prolonged weakness yesterday as manufacturers reported a slump in orders.

The high deficit also casts doubt over the coalition's plan to defend Britain's top triple-A credit rating and hold down borrowing costs, and Mr Osborne may soon face the unpleasant choice of more austerity or missing his goal to close the budget gap within five years.

The public sector finances, excluding financial sector interventions, showed a deficit of £557m, compared with a £2.8bn surplus in July 2011, the Office for National Statisticssaid.

"At this rate, borrowing for 2012/13 overall will massively overshoot the Office for Budget Responsibility's forecast," said Vicky Redwood, economist at Capital Economics.

"With the recovery falling well short of the OBR's expectations, we think that the government will struggle to cut borrowing at all next year," she added.

Economists said borrowing could overshoot the planned £92bn for this fiscal year by more than £30bn, if the public finances keep deteriorating at the current rate.

The coalition government aims to cut the budget deficit to 5.8pc of gross domestic product this year from 8.2pc of GDP in the 2011/12 fiscal year, helped in part by a one-off boost from the transfer of Royal Mail pension assets to the public sector.

For the year to date, public sector net borrowing -- excluding financial sector interventions, the Royal Mail boost and other one-offs -- totalled £47.2bn, up £11.6bn from 2011.

Including the Royal Mail transfer, borrowing for the fiscal year to date totals £16.9bn compared with £35.6bn between April and July 2011.

The coalition has made the reduction of Britain's record deficit the corner stone of its policies, but calls to soften the austerity drive have been growing due to the weak economy.

Stifled

The recent Olympics have lifted Britons' spirits and may have made the country some money, but the economy remains stifled by business and consumer fears about the raging eurozone debt crisis.

A survey from the Confederation of British Industry showed that this m

By Sven Egenter and David Milliken (Independent/Reuters)

BRITAIN'S public finances veered further off track in July after a shortfall in corporation tax revenues and higher spending, putting the government's deficit goals in doubt and raising the prospect of more austerity on top of the planned spending cuts.

After nine months of recession, the unexpected deficit underscored the lack of scope for chancellor George Osborneto give a meaningful boost to the economy -- which looked at increased risk of prolonged weakness yesterday as manufacturers reported a slump in orders.

The high deficit also casts doubt over the coalition's plan to defend Britain's top triple-A credit rating and hold down borrowing costs, and Mr Osborne may soon face the unpleasant choice of more austerity or missing his goal to close the budget gap within five years.

The public sector finances, excluding financial sector interventions, showed a deficit of £557m, compared with a £2.8bn surplus in July 2011, the Office for National Statisticssaid.

"At this rate, borrowing for 2012/13 overall will massively overshoot the Office for Budget Responsibility's forecast," said Vicky Redwood, economist at Capital Economics.

"With the recovery falling well short of the OBR's expectations, we think that the government will struggle to cut borrowing at all next year," she added.

Economists said borrowing could overshoot the planned £92bn for this fiscal year by more than £30bn, if the public finances keep deteriorating at the current rate.

The coalition government aims to cut the budget deficit to 5.8pc of gross domestic product this year from 8.2pc of GDP in the 2011/12 fiscal year, helped in part by a one-off boost from the transfer of Royal Mail pension assets to the public sector.

For the year to date, public sector net borrowing -- excluding financial sector interventions, the Royal Mail boost and other one-offs -- totalled £47.2bn, up £11.6bn from 2011.

Including the Royal Mail transfer, borrowing for the fiscal year to date totals £16.9bn compared with £35.6bn between April and July 2011.

The coalition has made the reduction of Britain's record deficit the corner stone of its policies, but calls to soften the austerity drive have been growing due to the weak economy.

Stifled

The recent Olympics have lifted Britons' spirits and may have made the country some money, but the economy remains stifled by business and consumer fears about the raging eurozone debt crisis.

A survey from the Confederation of British Industry showed that this month manufacturers recorded the worst decline in orders since December.

The finance ministry said that while it would continue to allow automatic stabilisers -- mostly benefit payments and a lower tax take -- to support the economy, yesterday's figures showed there was no scope for deficit-financed spending.

"The government remains committed to the credible plan we have set out to deal with Britain's debts, and today's numbers emphasise how risky it would be to deliberately increase borrowing," a finance ministry spokesman said.

Britain's public finances are highly seasonal, and July typically shows a surplus due to inflows of income and corporation tax.

onth manufacturers recorded the worst decline in orders since December.

The finance ministry said that while it would continue to allow automatic stabilisers -- mostly benefit payments and a lower tax take -- to support the economy, yesterday's figures showed there was no scope for deficit-financed spending.

"The government remains committed to the credible plan we have set out to deal with Britain's debts, and today's numbers emphasise how risky it would be to deliberately increase borrowing," a finance ministry spokesman said.

Britain's public finances are highly seasonal, and July typically shows a surplus due to inflows of income and corporation tax.


 

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