Chancellor will be heaving a sigh of relief at todays public sector finances figures says ITEM Club - Ernst & Young - United Kingdom

Chancellor will be heaving a sigh of relief at today's public sector finances figures, says ITEM Club

Nida Ali, economic advisor to the Ernst & Young ITEM Club, comments on today’s public sector finances figures:

• These figures will certainly have the Chancellor heaving sigh of relief
• Although revenue growth has slowed a little, the rate of growth of government expenditure has fallen sharply to just 0.5%
• But the government still has a difficult road ahead, and we think that the OBR’s target for net borrowing in 2011/12 will still be missed, albeit by a narrow margin

“These figures will certainly have the Chancellor heaving a sigh of relief ahead of November’s autumn statement. Not only is net borrowing in September less than it was 12 months ago, a massive downward revision to August’s data has meant that borrowing in the financial year to date is running £7.5bn lower than last year.

“Although growth in government revenues is down compared to last month (driven by a sharp fall in revenues from income tax), the rate of growth of government expenditure has slowed sharply to just 0.5%. This is a step in the right direction and a continuation of these trends will help to rein in the public finances.

“However, the government still has a difficult road ahead. Adverse developments in the global economy have weakened the UK’s growth outlook considerably and this will make it harder to continue the momentum over the second half of the financial year. The government is therefore likely to still miss the OBR’s target for net borrowing in 2011/12, albeit by a relatively narrow margin.”