UK government borrowing falls slightly in May

Government borrowing fell slightly in May compared with the same month a year ago, according to official figures, but it was still higher than expected.

 The Office for National Statistics said borrowing, excluding support for state-owned banks, was £9.7bn in May, down £0.4bn from the same month last year.

It was the lowest May total since 2007, but economists had forecast £9.5bn.

The ONS revised down its estimate of the amount borrowed in the 2015-16 financial year to £74.9bn.

But for the financial year so far - covering April and May - borrowing has reached £17.9bn, £0.2bn higher than the same period a year ago.

Receipts from income, corporation and VAT taxes in May were all higher than a year earlier, but the government's total current expenditure also rose.

The ONS said that total public sector net debt - excluding banks - by the end of May stood at £1.606 trillion, the equivalent of 83.7% of gross domestic product (GDP). 

 

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

The Office for Budget Responsibility (OBR), which produces economic forecasts for the government, has estimated that the public sector will borrow £55.5bn during the financial year to March 2017; a reduction of about £20bn for the previous financial year.

'Eye off the ball'

Chancellor George Osborne has pledged to fix the public finances, and in March insisted that the UK was still on track to return a budget surplus by 2020.

But both the Treasury and Bank of England have said the economy has been hit due to uncertainty ahead of Thursday's EU referendum.

Capital Economics economist Scott Bowman said that the chancellor still "had a long way to go" to meet his projections. 

"Admittedly, we would take the figures for the first few months of the fiscal year with a pinch of salt as they are often revised in time due to being largely based on forecast data.

"And if the UK votes to remain in the EU next month - as bookmakers' odds still suggest - then GDP growth should rebound in the second half of this year, paving the way for a more rapid improvement in the public finances," he added.

Ross Campbell, public sector director at accountancy industry body ICAEW, accused the chancellor of "taking his eye off the economic ball".

"Whatever the result on Friday morning, whether we remain in or leave the European Union, it is vital that government devises a comprehensive and rigorous strategy to kick-start a faltering economic recovery," he said.