Boost for Osborne as borrowing falls by £1bn

CHANCELLOR George Osborne’s deficit reduction plans have received a boost after the government’s borrowing fell by more than expected in September.

Public sector borrowing, excluding financial interventions such as bank bail-outs, dropped to £14.1 billion in the month, down from £15.4bn in the same month a year ago.

Figures for August were also revised lower by the Office for National Statistics (ONS).

Economists have questioned whether the Treasury will meet the government’s tax and spending watchdog’s forecast for borrowing of £122bn this financial year, compared with the £137bn recorded the previous year.

The chances of hitting the target are in jeopardy because the economy is growing more slowly than previously forecast, which is reducing income from taxes.

The growing number of people out of work also means the government is spending more on benefits.

The government’s coffers were boosted during September after tax receipts rose 4.2 per cent to £40bn, boosted by the 20 per cent rate of VAT.

The rise in receipts outstripped a 0.5 per cent increase in spending to £51.2bn, despite record September interest payments on the Government’s debt, which rose 17.5 per cent to £2.7bn.

The Government’s net investment declined 18 per cent to £2.9bn as it cut spending, including on building and civil engineering works. The UK’s net debt rose to £966.8bn, up from £833bn, and now accounts for 62.6 per cent of GDP.

August’s borrowing figure was downgraded to £13.7bn from a record £15.9bn after government expenditure was £1bn less than previously thought and income and capital gains taxes were revised upwards.

The Government has borrowed £63.5bn so far this financial year, down £7.5bn on the same period a year ago.