UK government borrowing was higher than expected last month as tax receipts fell and spending rose.
The Office for National Statistics (ONS) reported today that public borrowing in May 2012, excluding financial interventions such as bank bail-outs, reached GBP17.9bn. This is up from just over GBP15bn in the same month in 2011.
May’s figure was higher than economists’ forecasts of about GBP14.8bn and it indicates that the government may find it difficult to meet its debt reduction target for the year.
Vicky Redwood, chief UK economist at Capital Economics, commented: “The main problem remains a sharp slowdown in tax receipts. And with the economy probably still in recession, receipts are likely to remain weak.”
The increase in borrowing last month was driven by a 7.3% fall in income tax receipts from the recession-hit economy, combined with a rise in total government spending of 7.9% on the year. In particular, welfare benefit payments increased by 11.7% compared with the same month last year.
Britain’s total public sector net debt, excluding the temporary effects of financial sector interventions, rose to GBP1.013tn which is equivalent to 65% of GDP, a record for the month of May and the third-highest level on record since the series began in 1993.
The ONS also reported that changes to the way it calculates the public finances had resulted in government borrowing for the last financial year being revised upwards to GBP127.6bn, from the previous figure of GBP124.4bn.