Borrowing figures offer boost for Osborne

Chancellor George Osborne on the campaign trail in Derbyshire
Chancellor George Osborne on the campaign trail in Derbyshire

George Osborne has received another pre-election boost as official figures showed he beat his target for reducing annual public sector borrowing for the latest financial year by nearly £3 billion.

Borrowing - excluding the effect of bank bailouts - was £87.3bn for the year to the end of March, down from £98.5bn in 2013/14, according to the Office for National Statistics (ONS).

The result undershot the latest target of £90.2bn set by the independent Office for Budget Responsibility (OBR) at the time of last month’s Budget.

It means that annual borrowing (GDP) has fallen by more than £60bn from £153.5bn in 2009/10 just before the Coalition came to power.

As a percentage of gross domestic product (GDP) it has dropped by half from 10.2 per cent to 4.8 per cent.

However, underlying debt of £1.48 trillion is more than £500bn higher than the 2009/10 figure of £956bn.

The nation’s debt represents 80.4 per cent of GDP, up from 62 per cent five years ago.

Annual borrowing figures received a boost from the best March in 11 years for the public finances, with the deficit for the month at £7.4bn, £400m lower than a year ago.

Treasury coffers were boosted in the month by income and capital gains tax receipts up £700m from last year to £15.5bn and “exceptionally low” index-linked debt interest payments, due to low inflation.

For the full fiscal year, income and capital gains tax receipts grew by £8.1bn to £169.7 billion and receipts for stamp duty on land and property rose by £1.5bn to £10.9bn.

The annual borrowing total was also improved by a £1.3bn downward revision for the previous total for the year to February.

Howard Archer, chief UK and European economist at IHS Global Insight, said the data was “welcome news for the Conservatives ahead of May’s general election as it helps their credibility on the public finances”.

But he said the fact that borrowing amounted to 4.8 per cent of GDP “highlights the fact that eradicating the fiscal deficit is still very much a work in progress”.

Rain Newton-Smith, CBI director of economics, said: “The Government’s deficit as a share of GDP has halved during the course of this Parliament. There is still plenty more to do though, so whoever forms the next government must prioritise deficit reduction.

“Sound public finances are vital both to supporting business confidence and funding sustainable public services.”

David Kern, chief economist at the British Chambers of Commerce, said: “We have to make more progress towards stabilising our public finances - it is a difficult but necessary task.

“The challenges in the financial sector and lower oil and gas output constrain our ability to generate tax receipts.

“The simple if uncomfortable truth is, we must focus on reducing public spending so that we can live within our means.”