UK borrowing hits lowest level for decade

George Osborne is under fire after the latest figures. Picture: Reuters

The new borrowing figures, showing a fall in the UK deficit – the difference between the government’s expenditure and income – were hailed by the Chancellor as evidence that the coalition government’s austerity measures were working.

But critics claimed borrowing remained £10.7 billion higher than Mr Osborne had planned.

Yesterday’s figures from the Office for National Statistics showed that the deficit in the 2013-14 tax year fell to 6.6 per cent of gross domestic product GDP), from 7.4 per cent in  2012-13 – in line with recent government plans.

The figures led the Treasury to claim that it was on target to turn the economy round.

A spokesman said: “These public sector finances are further evidence the government’s long-term economic plan is working, delivering economic security for hardworking people.

“Public sector net borrowing in 2013-14 was over 10 per cent lower than forecast at last year’s Budget, and the deficit has fallen by over a third. But the job is not yet done and there is still much more to do to build the resilient economy the Chancellor spoke of at the Budget.”

However, Britain’s debt mountain was £10.7bn higher than expected in the last financial year as it rose to more than three-quarters of GDP, despite a fall in annual borrowing.

Underlying public sector debt was £1,268.7bn for the year to March, ahead of the £1,258bn forecast last month by the Office for Budget Responsibility (OBR), as central government receipts were lower than the OBR expected. It meant the sum owed by the public purse rose more steeply than predicted, to 75.8 per cent of GDP, compared to the 74.5 per cent OBR forecast.

Chris Leslie, Labour’s shadow chief secretary to the Treasury, said: “These figures are further evidence that George Osborne’s promise to balance the books by next year now lies in tatters.

“These figures are merely in line with Budget forecasts that borrowing is now expected to be £190bn more than planned under this government. A deficit this year of £107.7bn compared to the Chancellor’s claim in 2010 that it would be just £60bn is the cost of the three damaging years of flatlining and falling living standards we have seen since the election.”

SNP Treasury spokesman Stewart Hosie MP said: “Despite the Budget deficit falling, the current account will not be in the black until years after  Osborne promised.

“When the Tories came to power, Osborne promised the deficit would be reduced to £60bn this year. Now we find it is almost double that at £107bn. This government has failed to meet any of the original targets it set for itself.”

John Hawksworth, chief economist at PwC, said despite the fall in borrowing, the annual deficit remained the second highest as a share of GDP of any of the major G7 economies. “Overall, the government’s fiscal plans remain on track, but there is no room for complacency on the public finances,” he said.

Howard Archer, chief European and UK economist at IHS Global Insight, said the fact that the Chancellor met the annual borrowing target for the financial year provided a “psychological boost for the coalition”.