UK still on track to undershoot OBR's borrowing forecast - ITEM Club comments on today's public sector finances figures

21 August 2013

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  • Despite the seemingly disappointing figures in July, the underlying picture remains positive
  • Spending should drop back in the second half of the year while tax revenues are growing robustly
  • The government is on track to comfortably undershoot the OBR's borrowing forecast for 2013/14

Nida Ali, economic adviser to the EY ITEM Club, comments on today’s public sector finances figures:

“On the face of it, these figures look disappointing, with borrowing in July higher than last year. But in our view the underlying picture remains positive.

“Recent history suggests that early estimates of borrowing are subject to considerable downward revisions; borrowing in 2012/13 has been revised down by more than £4bn since the Budget. And spending appears to be more front-loaded this year, implying that expenditure should drop back in the latter half of the year. Meanwhile, tax revenues are growing robustly and, given the stronger economic outlook, this trend should continue in the months ahead.

“Stripping out the temporary factors, overall borrowing in 2012/13 was £116.5bn. Therefore, even if there is no improvement in the public finances this financial year, the government is on track to undershoot the OBR's full-year borrowing forecast of £119.8bn. Given that the recovery in activity has been much faster than the OBR had forecast, there would appear to be scope for an even bigger undershoot.”