George Osborne’s deficit reduction goal in doubt

George Osbornes deficit reduction plans threatened. Picture: Getty

Data from the Office for National Statistics (ONS) yesterday showed revenues from income and wealth taxes failed to grow, while borrowing for September, excluding the effects of bank bail-outs, was £11.8 billion. That was 15.3 per cent, or £1.6bn, ahead of September last year.

The figures mean that, halfway through the financial year, the Treasury looks well behind the target for a 12 per cent fall in the annual deficit expected by the independent Office for Budget Responsibility (OBR).

Borrowing for April to September stands at £58bn – 10 per cent higher than a year earlier.

Taxes on income and wealth for September of £13.1bn were flat on the same month last year and just 0.6 per cent ahead for the year to date. Within this, revenues from income tax and capital gains tax rose 2.2 per cent for the month and 0.1 per cent for the year to date.

OBR chairman Robert Chote has warned that the squeeze on pay growth is hitting the government’s revenues from income tax despite record numbers in work. Pay growth has been lagging behind inflation since 2008 and latest official figures showed it was just 0.7 per cent.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The government’s current fiscal problems largely reflect the fact that much weaker-than-expected earnings growth has limited income tax receipts, along with a large number of people now being in low-paid jobs or self-employed.

“The Chancellor is looking ever more unlikely to meet his fiscal targets for 2014-15.”

A Treasury spokesman said: “We have seen stronger growth in receipts this month, but as today’s figures show, the impact of the great recession is still being felt in our economy and the public finances.

“At the same time, we have to recognise that the UK is not immune to the problems being experienced in Europe and other parts of the world economy.”