Public borrowing higher than expected in December
By Patrick Graham and Olesya Dmitracova | January 22, 2013 10:35 PM EST
Britain's government borrowed slightly more than expected in December as the economy continued to struggle, thwarting efforts to erase a large budget deficit and adding to pressure on the UK's credit rating.
The Office for National Statistics said on Tuesday public sector net borrowing excluding financial sector interventions, the government's preferred measure, rose last month to 15.419 billion pounds from 14.848 billion pounds in December 2011.
That was slightly above the 15.2 billion pounds forecast in a Reuters poll and took borrowing to date in the fiscal year that ends in April to 78.510 billion pounds, down from 99.281 billion pounds in 2011-12.
The lower cumulative figure is due to the absorption of Royal Mail employees' pension savings. Excluding that effect, borrowing stands at 106.5 billion pounds - up 7.3 percent this year compared to a roughly 10 percent rise reported for the April-November period.
Chancellor George Osborne had imposed tough spending cuts and tax rises in a bid to eliminate Britain's structural budget deficit - the deficit that would remain if the economy were operating at full steam - by the next election in 2015.
Feeble economic growth has derailed that plan, however, and forced Osborne to admit it will take two years longer to meet the target. Tuesday's data showed government receipts rose just 3.6 percent on the year, while spending grew 5.4 percent.
"Pretty much in line with market expectations," said Philip Shaw of Investec in London. "Going back, the revisions are modestly favourable, but really the deficit is still in line to overshoot the Office for Budget Responsibility's forecasts from the autumn statement last month."
The pound and British government bonds showed no reaction to the data.
The smaller borrowing overshoot compared to the one recorded for the April-November period - mostly caused by back revisions to data - offers the government a glint of hope in its drive to reduce the deficit.
But borrowing so far this year is only 2 billion pounds off the budget watchdog's forecast of 108.5 billion pounds for the whole 2012-13 tax year which ends on April 5, with the moribund economy making a late surge in tax receipts unlikely.
The figures are unlikely to deter speculation that Britain will lose its coveted triple-A credit rating, which is already on negative outlook with all three major ratings agencies.
The broader public sector net borrowing measure - which includes the cost of bailing out Britain's banks, as well as some revenues from the sector - rose to 13.208 billion pounds in December from 12.626 billion pounds in December 2011.
Britain's total public sector net debt, excluding financial sector interventions, rose to 1.11 trillion pounds or 70.7 percent of GDP in December. Including the cost of bank support, it is now 140.3 percent of GDP.
The finance ministry said in a statement that the figures underlined Osborne's view in his December budget update that it was taking time but the economy was healing.
Bank economists are generally more downbeat, and many think the economy shrank again in the final quarter of 2012 after a single quarter of growth and risks returning to recession.
"There are no signs of progress in the public finances ... following the widening trend in the deficit through much of last year," said Shaw. "Really what the chancellor must be hoping for is a resumption of growth, not least to get borrowing down. We are of the view that fourth quarter 2012 will be close to flat."
(Editing by Catherine Evans)