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UK public finances improve in November, helped by forex fine

Friday, December 19, 2014 - 17:39
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British finance minister George Osborne said on Thursday there will come a point when interest rates rise from record low levels in Britain, and that could be interpreted a sign of economic strength.

[LONDON] Britain's public finances improved sharply in November, official data showed on Friday, helped by a fine on banks hit by a foreign exchange trading scandal.

There was also an improvement in income tax receipts which have been weak so far this year. But finance minister George Osborne still has work to do to meet his new, less ambitious full-year borrowing goals.

The Office for National Statistics said public sector net borrowing, which excludes state-controlled banks, totalled 14.1 billion pounds in November, down 10 per cent from a year earlier.

Economists taking part in a Reuters poll had forecast a shortfall of 15.0 billion pounds.

The ONS said the figures were boosted by payment of a 1.1 billion-pound fine by banks under a settlement with regulators who investigated a foreign exchange rate fixing scandal.

Mr Osborne said this month that he was off course to meet his target for cutting the budget deficit in the current 2014/15 financial year and announced a new one that was nearly 6 percent higher at 91.3 billion pounds.

The ONS said that from April through November - the first eight months of the financial year - public sector net borrowing excluding banks was 75.8 billion pounds, 0.6 per cent lower than in 2013.

Last month's data had shown that borrowing between April and October was 6.1 per cent higher than a year earlier.

Britain's public accounts have not improved along with the economy in large part because pay growth has been slow, and the threshold for paying income tax has been raised, hurting receipts from income taxes.

The government's budget forecasters said earlier this month that they expected tax receipts over the next four years be much weaker than they had previously thought, a hit that would be offset by lower debt interest payments.

In November, income tax and national insurance contributions 2.9 per cent compared with the same month last year while interest payments were down 6.2 per cent.

Since it came to power in 2010, deficit reduction has been the policy priority of British Prime Minister David Cameron and his coalition partners in the Liberal Democrats party.

Weak growth in 2011 and 2012 means it will not achieve its original plan to largely eliminate the deficit by 2015.

Mr Osborne has said that if the Conservatives win May's national elections, he will aim to deliver a large overall budget surplus by the end of the decade, meaning more tough spending cuts in the coming years.

The opposition Labour party promises it will eliminate the deficit on the current budget - which excludes investment - as soon as possible if it wins the elections in May and has accused Mr Osborne of an "ideological" pursuit of greater austerity.

The government is hoping that at least some of the shortfall this year will be made up in January when the public coffers will be boosted by tax payments from high earners for the previous financial year.

Public sector net debt excluding state-controlled banks totalled 1.457 trillion pounds in November, equivalent to 79.5 per cent of gross domestic product, a record for the month of November.

REUTERS

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