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UK Economy
Higher receipts boost public finances
From the Financial Times of Fri, 19 Dec 2014 10:50:14 GMT

Higher receipts helped the UK’s public finances improve slightly in November but the Chancellor still faces a tough challenge to meet his annual targets as cumulatively the government has borrowed only £500m less than at the same point last year.

The government borrowed £14.1bn in November to cover the gap between receipts and spending, down £1.6bn from November 2013. For the financial year to date, the government has borrowed £75.8bn compared with £75.3bn in the same period last year.

The latest forecast, from the Autumn Statement, was that public sector borrowing would come in at £91.3bn in 2014/15, down from £97.3bn in 2013/14.

Much will hang on January’s data, when income tax receipts come in from those paying tax under self-assessment, which the government believes will deliver a substantial boost to its coffers.

The receipts are expected to be unusually strong as they will cover the 2013/14 financial year, which saw some top rate taxpayers defer income to take advantage of the dropping of the 50p tax rate in April 2013.

Samuel Tombs, senior UK economist at consultancy Capital Economics, said the figures showed that there was “at last, some good news” on the public finances, but warned that borrowing in the final four months of the fiscal year will have to be a “chunky” £6bn lower than last year for the forecast reductions to be met.

“So while November’s public finance figures are a step in the right direction, the road to fiscal sustainability look set to be long and bumpy,” he said.

There was some good news for the government in the monthly detail, with receipts up 5.5 per cent in November compared with the previous year and critically income tax payments up by 4.1 per cent.

The numbers were flattered by the inclusion of £1.1bn received in fines paid by banks as a result of the Forex scandal.

Looking at the year to date, income tax payments still remain very weak considering the rapid increase in employment, up only 1.2 per cent on the year to date.

A Treasury spokesperson said that it was “encouraging” to see strong receipts, but added: “The effects of the great recession are still being felt in our economy and the public finances. That’s why we will continue working through the plan that is building a resilient British economy.”

Howard Archer, chief UK economist at IHS Global Insight, said the figures delivered a “small early Christmas present” to the government, but added that meeting the targets for the year “currently looks a big ask”.

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