Deficit reduction appears to have gone into reverse - EY ITEM Club comments

21 June 2016

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  • Borrowing in May only marginally down on the levels seen a year earlier…
  • …indicating that deficit reduction in 2016-17 has gone into reverse

Martin Beck, senior economic advisory to the EY ITEM Club, comments:

“Deficit reduction appears to have gone into reverse with revenue only achieving modest gains in May.

“Revenue from VAT increased at an annual rate of 1.9%, the weakest in 15 months, while income tax revenues saw an increase of 1.5%. Stamp duty on property purchases fell 5.5% after surging earlier in the year as buyers rushed to beat April’s tax rises. Meanwhile, central government spending increased by 2.2%.

“It is worth noting that the OBR’s March Budget forecast predicted a 23% drop in the deficit for the fiscal year as a whole. So, although early days, a sizeable improvement will be necessary in coming months to get that forecast back on track.”