September 20, 2005

Budget deficit narrows

by brian_turner

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The UK’s budget deficit narrowed to £4.8bn in August 2005, compared to £6.6bn in August 2004, after higher tax receipts exceeded spending.

August public sector net borrowing was the lowest for three years, according to figures from the Office for National Statistics (ONS). Borrowing in the fiscal year so far, however is still higher than in 2004 and it is uncertain if full-year forecasts will be achieved.

Chancellor of the Exchequer Gordon Brown estimates that public borrowing in the 2005/06 financial year will not exceed £31.9bn. However, borrowing already stands at £20.8bn – significantly higher than the £18.6bn recorded at the same point last year.

The August borrowing figure of £4.8bn beat analysts’ forecasts of £6bn. It was also better than £6.57bn in August 2004. Jonathan Loynes, chief UK economist at Capital Economics said: “August’s UK public finances figures are, for once, rather better than expected”.

The Centre for Economics and Business Research now expects the Chancellor to revise his £32bn year forecast upwards to approximately £40bn, in the Pre-Budget Report this autumn. Although this would represent an overshoot of £7bn, it is a substantial improvement on recent forecasts.

The CEBR said: “Two months ago a purely statistical projection would have implied public sector borrowing for the financial year to £60bn”.

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