Public sector net borrowing, excluding financial interventions such as bank bailouts, is expected to be between £16bn and £16.5bn, compared with £15bn in May last year
Chancellor George Osborne’s hopes of slashing government borrowing will be dealt a blow as the double-dip recession weighs heavily on the public finances.
Public sector net borrowing, excluding financial interventions such as bank bailouts, is expected to be between £16bn and £16.5bn, compared with £15bn in May last year.
While May is only two months into the financial year, the weak figures will trouble the chancellor who is aiming to trim total borrowing in 2012/2013 to £120bn, excluding a one-off boost from the transfer of the Royal Mail pension fund into Treasury ownership.
May’s borrowing figure will be impacted by a lack of tax receipts, which analysts said was a consequence of the recession and sluggish economic recovery.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “May’s public finances are expected to have been pressurised by the hit to tax revenues coming from weakened economic activity.”
April’s borrowing figures were flattered by a one-off £28bn lift from the value of assets transferred from the Royal Mail pension plan.
But excluding this one-off impact, the government actually recorded public sector net borrowing, excluding financial interventions such as bank bailouts, of £11.5bn – £3bn higher than City forecasts.
Britain is reportedly on course to borrow nearly £11bn more than forecast by the independent tax and spending watchdog the Office for Budget Responsibility (OBR).
The OBR has predicted that borrowing will fall from £124.4bn last year to £92bn, including the Royal Mail pension impact, in 2012/2013 and £98bn in 2013/2014.
But independent forecasters expect borrowing of £95.8bn this year and £104.9bn in 2013/2014, nearly £11bn more than the OBR forecast, the Sunday Times said.
The chancellor is in the process of rolling out a series of tough austerity measures, which include billions of pounds of spending cuts and hundreds of thousands of public sector job losses.
Earlier this month, the chancellor and governor of the Bank of England Sir Mervyn King unveiled a multibillion-pound lending scheme to stimulate economic growth – but ministers insisted the move was not a “plan B”.