Britain posted its largest budget shortfall for any April since monthly records began in 1993 as tax revenue fell and spending climbed, casting doubt on whether the government can meet its deficit-reduction target this year.
Net borrowing was £10 billion ($16.2 billion), compared with £7.2 billion a year earlier, the Office for National Statistics said in London today. The median of 12 forecasts in a Bloomberg News survey was for a shortfall of £6.5 billion. Revenue fell 0.8 per cent, partly reflecting a one-time boost from a bank bonus tax a year ago, and spending rose 5 per cent.
Chancellor of the Exchequer George Osborne may find it hard to meet his deficit-cutting goals as the economy struggles to gain momentum, the opposition Labour Party and some economists say. Growth stagnated in the six months through March and the government will step up its programme of cuts this year.
“This is a disappointing start to the new financial year,” said Nida Ali, economic advisor to the Ernst & Young ITEM Club. “Given that the worst of the pain is yet to come, the chancellor’s target of reducing borrowing by £30 billion in 2011/12 looks more stretching than ever, especially with economic growth looking likely to disappoint.”
The pound depreciated as much as 0.3 per cent to 87.43 pence per euro, before trading 0.2 per cent weaker at 87.27 pence as of 11.47 am in London. Sterling climbed 0.2 per cent to $1.6157, after depreciating as much as 0.4 per cent to $1.6058.
The fall in tax receipts partly reflected a year-earlier gain from the bank payroll tax that brought in £3.5 billion. Revenue in April 2010 was also boosted by “relatively high bonuses being paid and share options being exercised,” the statistics office said.
