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UK borrowing higher than expected

Do Not UseDo Not Use 24/05/2016

Government borrowing was higher than analysts' expectations in April after forecasts for company tax payments fell short of hopes.

The Office for National Statistics said borrowing, excluding support for state-owned banks, was £7.2bn in April.

That was down from £7.5bn last year but higher than analysts' forecasts of about £6.6bn.

The ONS also revised up its estimate of the amount borrowed in the financial year to March to £76bn.

That was £2bn more than its previous estimate, and £3.8bn above the prediction that had been made by the independent Office for Budget Responsibility (OBR), which produces forecasts for government.

The main reason for the lower figure was weaker-than-expected income from workers' national insurance contributions.

The ONS says annual borrowing has been falling in general since the peak reached in the 2009-10 financial year.

Last year's figure was £15.7bn lower than for the year before, and is half that borrowed in 2009-10.

'Muted start'

The ONS said that total public sector net debt - excluding public sector banks - by the end of April stood at £1.596 trillion, the equivalent of 83.3% of gross domestic product.

April's figure was affected by less-than-expected tax income from companies. Corporation tax revenue fell 5.1% from a year earlier to £5.8bn.

But it was boosted by changes to property taxes, introduced in April for buyers of second homes and investment properties.

The figures for April were saw the biggest take of stamp duty on land and property on record of £1.3bn.

The Chancellor, George Osborne, has laid out targets for borrowing, which he has pledged to continue to bring down.

Howard Archer, chief economist at IHS Global Insight, said: "The muted start to fiscal year 2016-17 will fuel doubts about George Osborne's ability to get the deficit down to £55.5bn in 2016-17.

"It will also likely fuel even larger doubts about his ability to meet his long-term objective of a surplus of £10.4bn in 2019-20, especially as he now has to cover the £4.4bn gap that has resulted from the dropping of the planned cuts to disability benefits."

Martin Beck, senior economic advisor to the EY ITEM Club, echoed that view: "This looks to be a tall order, particularly given that the recent weakness in activity appears to be dampening growth in tax receipts. The government will need to see a strong rebound in activity in the second half of the year if it is to have a realistic chance of keeping its deficit reduction plan on track."

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