Public sector net borrowing excluding public sector banks was £6.9bn in June, well above June 2016’s £4.8bn and the consensus figure of £4.2bn.
In a note, Pantheon UK chief economist Samuel Tombs said the jump in borrowing primarily reflected a £4.6bn, or 8.3%, year-on-year leap in central government current expenditure.
Although spending rose in most areas, a £1.2bn increase in interest payments and £0.8bn rise in contributions to the European Union budget, partly to correct for underpayments in previous years, were to blame for the particularly strong growth.
Tax receipts increased by just 4.6% year-on-year in June, but Pantheon noted the average 4.7% year-on-year increase over the first three months of this fiscal year is well below the 6.5% increase seen in 2016/17. It said this points to economic fragility.
Growth in tax receipts has at least exceeded the 3.2% full-year rate forecast by the Office for Budgetary Responsibility in the March Budget.
But Tombs said that growth in receipts will slow sharply at the end of this fiscal year, because the bumper batch of self-assessment tax receipts collected in January and February 2017, due to prior tax changes, will not be repeated.
He said it is still too early to presume that the fiscal consolidation is on track and expects the Chancellor will be willing to scale back his austerity plans in the next Budget.
Pantheon said borrowing will total £50.3bn this fiscal year, undershooting the OBR’s March Budget forecast of £58.3bn, if the year-on-year trend is maintained.
Borrowing, however, will be much higher in the final months of this fiscal year than last year, so Pantheon said the OBR’s forecast still looks broadly right.
