Public finance data 'disappointing'



Britain's public finances suffered a worse-than-expected start to the financial year as borrowing in April rose to £7.4 billion - £1.7 billion higher than the same month in 2013.

The figure, which excludes the distorting effect of bank bail-outs, had been expected at £6.2 billion.

But separate economic figures from the Office for National Statistics (ONS) were brighter, confirming gross domestic product (GDP) growth of 0.8% for the first quarter of the year.

Within this, the performances of the construction and manufacturing sectors were revised up from
previous estimates, while household consumption rose for a tenth successive quarter.

But exports fell by 1%.

Meanwhile, business investment rose by 2.7% in the first three months of the year, the first time it has recorded five successive quarters of growth since 1998.

It increased to £32.8 billion, its highest level since the third quarter of 2008.

But the data on public sector finances appeared to represent a headache for Chancellor George
Osborne as the independent Office for Budget Responsibility (OBR) targeted an 11% fall in the deficit for the current 12 month period.

Borrowing for April by the OBR's preferred measure - excluding the effects of the Bank of England's quantitative easing (QE) asset purchase programme - was £11.5 billion, £1.9 billion higher than in 2013.

Samuel Tombs of Capital Economics said: "Today's borrowing number suggests that the fiscal consolidation has not begun the fiscal year on a good footing."

Central government receipts were 0.3% lower at £50 billion compared to the same month last year, including a 29.8%, or £300 million rise in stamp duties to £1.1 billion and a £400 million increase in VAT
to £9.8 billion.

But income tax collected fell by £800 million to £11.1 billion.

Whitehall spending fell by 1% to £63 billion, with net social benefits up £500 million to £16.5 billion but savings elsewhere of £1.4 billion.

Comparisons of central government spending with last year were partly affected by changes to the way local authorities are funded.

Underlying public sector debt was £1.271 trillion, or 75.6% of gross domestic product, an increase from 73.8% at the same time last year but a slight fall on last month's 76%.

Ian Stewart, chief economist at Deloitte, said: "The recovery is looking better balanced and more sustainable with business investment, manufacturing and construction outpacing growth in the wider economy."

Howard Archer, chief UK and European economist, said: "In contrast to confirmation of robust GDP growth in the first quarter, the April public finance figures provided disappointing news for the Chancellor."

He said Mr Osborne would be "fervently hoping" for an improvement "to facilitate the offering of a
few sweeteners" to voters ahead of next year's general election.

David Kern, chief economist at the British Chambers of Commerce, said: "Our budget deficit is still too high and reducing it over the next few years will be a difficult task.

"The government must continue to reduce the share of public spending in GDP.

"Progress may be slow but pushing ahead with this job is essential if we are to see a secure and lasting recovery."

A Treasury spokesman said: "The figures show that the foundations for a broad based recovery are in now place, with manufacturing and construction growing more quickly than previously thought and business investment seeing its longest period of expansion in 16 years.

"But today's public sector finance figures remind us that we cannot take this for granted."

The shrinking value of the pound

The shrinking value of the pound