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Britain borrows more than expected in April and last financial year

Tuesday, May 24, 2016 - 17:48
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Britain's government borrowed more than expected in April as corporation tax revenues fell, possibly reflecting a slowdown in the economy, while the budget deficit for the last financial year was revised up.

[LONDON] Britain's government borrowed more than expected in April as corporation tax revenues fell, possibly reflecting a slowdown in the economy, while the budget deficit for the last financial year was revised up.

The Office for National Statistics said public sector net borrowing, excluding state-controlled banks, totalled 7.2 billion pounds in April, down 4.4 per cent compared with a year ago.

Economists in a Reuters poll had forecast a shortfall of 6.6 billion pounds.

The ONS also said it estimated the shortfall in the budget last year at just under 76 billion pounds, nearly 2 billion pounds more than previously thought.

As a share of economic output, the budget deficit stood at 4.0 per cent in 2015/16, a long way down from 10.3 per cent immediately after the financial crisis but still among the biggest for rich countries around the world.

Weaker than expected national insurance contributions were biggest factor behind the slippage in 2015/16.

The figures for the month of April were boosted by the biggest take of stamp duty on land and property on record, rising to 1.3 billion pounds.

The government introduced a new surcharge on the purchase of property bought for rental and second homes in April.

But the government's income from corporation tax fell 5.1 per cent compared with April 2015 to 5.8 billion pounds, chiming with business surveys that show Britain's economy has slowed ahead of the June 23 referendum on the country's membership of the European Union.

The slowdown has become a headache for British finance minister George Osborne.

In his March budget statement, Mr Osborne admitted defeat on one of his key fiscal goals - reducing national debt as a share of GDP each year - as the economic slowdown weighed on tax receipts.

Tuesday's figures also showed Mr Osborne missing his target for the size of the budget deficit last financial year by more than initially thought.

The finance ministry on Monday said an economic shock following a British departure from the EU could raise public sector net borrowing by 24 billion pounds in the next 2017/18 financial year. In the case of a severe shock, it could rise by 39 billion pounds.

Both the Treasury and Bank of England say the economy is suffering from uncertainty about the outcome of the referendum.

REUTERS

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