Britain’s public finances showed an excess of £11.4bn in January; approximately £5bn higher than in the same month in the previous year according to official reports. Yet corporation tax receipts went down 13.5 % according to the Office for National Statistics. As previous trends showed, January often shows a surplus owing to an influx of tax money from businesses and self-employed individuals.
Economists depicted that it will still prove to be difficult for the present chancellor to meet his targeted loan this year. With public sector net borrowing (not including financial assistance) for the said fiscal year is presently at £93.8bn which is £1.5bn higher at the same time last year.
January’s borrowing cost was far better than many experts had previously anticipated but they are pleased by a £3.8bn premium which the government received from the Bank of England under an amended policy. Under that agreement, the interest of the bank will earn on holding government liability when transferred back to the Treasury. Taking away that much the excess was now £7.6bn in January.
A lifeless economy would basically mean that the government is loaning more to pay for the economic breakdown as the welfare bill will go up. According the office for Budget Responsibility (OBR) the profit from the 4G spectrum auction will ease borrowing by £2.3bn towards the remaining year.
Nevertheless, in order to meet the autumn projections it will need a much stronger growth in tax receipts or a much lower projected expenditure by central or local governance.
The OBR is speculating that the public sector net borrowing for the year until April of 2013 will be £119.9bn, but some economists believe that the chancellor will surpass the projected amount by some way.
The institute for Fiscal Studies aired out concerns that the said borrowing figure for the year was to be £7bn more than what the OBR initially predicted due to the increased spending on public services administration and welfare benefit programmes. Furthermore, if this growth continues for the next few years while the growth in tax receipts stay in its low state, then the large intended fiscal tightening will most probably be increased.
Disappointing turn of events
The public sector’s net liability (the total amount own) is standing at £1.16 trillion as of January from £1.07tn as last year. This ultimately means that the percentage of GDP and public sector net debt combined has increased 4 % since last year.
Analysts from ING cautioned that although January’s figures are optimistic and promising, the real score isn’t really settled just yet. Britain’s AAA rating still remains under pressure with the economic activity still pacified and tax revenues under great disappointment. Although income tax and VAT receipts show a positive growth in January this year, corporation tax receipts recorded a decline of 13 % compared to last year.
The large dip in corporation tax receipts underscore need to sustain the growth of thriving companies with the ability to profit. The lack of financial capability of such companies needs to be urgently taken into consideration.