Good news for the Chancellor, with borrowing revised down for 2012/13 - EY ITEM Club comments

22 May 2013

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Andrew Goodwin, senior economic advisor to the EY ITEM Club comments on today’s public sector finances figures:

  • Good news all round with downward revisions to 2012/13 and lower borrowing in April
  • A stronger economy should translate into better public finances
  • Stronger public finances could encourage the IMF to be bolder in their calls for more stimulus

“Good news all round for the Chancellor with borrowing revised down for 2012/13. April’s figure is also well below the same period over the last two years, once the distortions caused by the Royal Mail and APF purchases are taken into account.

“We are now in the unusual situation of the economic recovery exceeding the OBR’s expectations. This should translate into a slightly stronger picture for the public finances too.

“These figures provide an interesting backdrop to the IMF’s policy recommendations, due to be presented later on today. It already appears likely that the IMF will call for a slower pace of deficit reduction and signs that the public finances are improving quicker than anticipated should strengthen their cause. This is certainly a line that we would agree with – the capital spending cuts have been too severe and there is a strong case for pushing more funding towards capital projects in the upcoming spending review.”