UK Government Borrowing Up As Tax Collections Fall

by Jason Gorringe, Tax-News.com, London

23 January 2003

After lower than expected tax collections in the first nine months of the UK's fiscal year (corporation tax receipts to December were down 12.6% against the previous year) net government borrowing has reached UK£21.4bn, already more than Gordon Brown's revised target of £20bn for the year.

Expectation among economists are now that borrowing is likely to top £24bn this year and £30bn next year. This would be 2.7% of GDP, getting close to the limit of 3% set by the EU's Maastricht rules. However, total public sector net debt of £335.6bn at the end of December was equivalent to 31.8% of GDP, compared with the Maastricht limit of 60% of GDP, and not very different from last year's 31.5%.

The Institute for Fiscal Studies said that current spending was slightly higher than government forecasts, but that capital expenditure of £5.2bn in the first nine months of the financial year was well behind the year's target of £14.3bn. "The chancellor's plans to bring about a sharp increase in public sector net investment this year are still proving difficult to deliver," said the IFS.

The government has consistently struggled to match its investment spending forecasts over the last five years - just as well perhaps given the borrowing figures. But there is usually a leap in spending during the last few months of the year as government bodies and local councils try to spend up to their budgets.

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