Print Page
News & Press: International News

U.K. Budget Deficit Narrows As Property Recovery Boosts Taxes

Tuesday, 22 October 2013   (0 Comments)
Posted by: Author: Svenja O’Donnell
Share |


Britain’s budget deficit narrowed more than economists forecast in September as the housing-market recovery boosted stamp duty and higher spending lifted value-added tax.

Net borrowing excluding temporary support for banks was 11.1 billion pounds ($18 billion) compared with 12.1 billion pounds a year earlier, the Office for National Statistics said in London. The shortfall was less than the 11.3 billion-pound median forecast in a Bloomberg survey of 22 economists. Tax receipts rose 7 percent, the most since June, and spending climbed 2.5 percent.

Britain’s economic recovery has brought a resurgence in the housing market, putting Chancellor of the Exchequer George Osborne on course to undershoot his borrowing targets this year. The improvement may mean the government can sell fewer gilts this year than it projected in April.

"Evidence of decent economic activity increases the chancellor’s chances of undershooting his fiscal targets even allowing for he fact that there may be a lagged impact of stronger growth n the public finances,” Howard Archer, an economist at IHS Global Insight in London, said before the data were released.

In the six months through September, net borrowing narrowed to 56.7 billion pounds from 62.6 billion a year earlier, raising the prospect that Osborne could undershoot the 120 billion pounds projected in March. The Office for Budget Responsibility is due to announce new forecasts Dec. 4.

If the momentum is kept up, net borrowing could fall to about 105 billion pounds this year instead of the 120 billion pounds forecast.

The figures exclude coupon payments from the Bank of England’s Asset Purchase Facility and the 28 billion-pound transfer of Royal Mail Group Ltd. pension assets in April 2012.

Stamp Duty

The increase in tax income was driven by stamp duty on property purchases, which grew 254 million pounds compared with a year earlier, and VAT, which rose by 386 million pounds, the ONS said.

Osborne has reduced the deficit from a postwar high of 11 percent of GDP when he took office in 2010 to 7.4 percent last fiscal year. The chancellor has pledged to run a budget surplus by 2020, implying that austerity will continue beyond the current 2018 forecasting horizon.

In September, the Treasury received 4 billion pounds from the Bank of England’s gilt holdings and 3.2 billion pounds from the sale of a 6 percent stake in Lloyds Banking Group Plc. The proceeds boosted cash measures of the public finances but not net borrowing.

Central government, which excludes state-owned banks, posted a cash requirement of 13.2 billion pounds last month. Planned debt sales are based on this measure and also take account of the cost of redeeming maturing gilts during the year.

Gift Sale

With the economy accelerating, the Debt Management Office will probably sell 153 billion pounds of gilts in the year through March 2014, instead of the 155.7 billion pounds it forecast in April, and issue a similar amount the following year, according to George Buckley, chief U.K. economist at Deutsche Bank in London.

Proceeds from the initial sale of shares in Royal Mail Group this month will be recorded in October at some stage, the ONS said.

This article first appeared in



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

  • Tax Practitioner Registration Requirements & FAQ's
  • Rate Our Service

    Membership Management Software Powered by YourMembership  ::  Legal