Borrowing targets 'may be missed'


Chancellor George Osborne wants borrowing for the financial year to come in at a maximum of £149bn

Government targets for public borrowing could be missed if official figures are higher than expected, according to an economist.

Borrowing in the financial year to date, excluding financial interventions by the Government, stood at £81.6 billion in October after a year-on-year rise in monthly borrowing.

Chancellor George Osborne wants borrowing for the financial year to come in at a maximum of £149 billion, while the independent tax and spending watchdog, the Office for Budget Responsibility, lowered its forecast to £148.5 billion.

But Samuel Tombs, economist at Capital Economics, said November’s borrowing figures could come in at £18 billion, overshooting last year’s £17.4 billion for the month. This would bring the total in the year so far to £99.6 billion.

He said: “Given the borrowing figures to date, the Government is just about on track to meet its fiscal forecasts. But November’s public finance figures could alter that picture.”

Mr Tombs said recent surveys had shown economic growth had slowed and current government spending was on the up, ahead of levels required to meet the OBR’s forecasts.

He went on: “Given that the majority of the fiscal squeeze is expected to be delivered through expenditure cuts, doubts may grow about the credibility of the Government’s plans if spending growth is not brought down sharply soon.”

Philip Shaw, economist at brokers Investec, also forecast an increase in public borrowing, excluding financial interventions, of £17.7 billion. He said: “Receipts for November are expected to be significantly up on the year as the economy continues to recover and expand but inflows are likely to be down from the level seen in October, a strong month for corporation tax.”

Howard Archer, chief UK and European economist at IHS Global Insight, expects a slightly smaller shortfall compared with a year ago, with public borrowing, excluding financial interventions, in at £16.8 billion, down on £17.4 billion last November.

He said: “Tax receipts should benefit from the economy’s improved performance since the second and third quarters of the year, while they have also been lifted by VAT rising back up from 15% to 17.5% in January. In addition, unemployment benefit claims have fallen by 165,100 overall from last October’s 12-year high of 1.6278 million, which is helping to limit the rise in public expenditure.”

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