Bankrupt Banker: George Osborne

The UK government unexpectedly had to borrow money in July, traditionally a good month for tax receipts.

<div dir="ltr" style="text-align: left;" trbidi="on"><span class="zemanta-img separator" style="clear: left;"><a href="http://commons.wikipedia.org/wiki/File:George_Osborne_0437.jpg" style="clear: left; display: block; float: left; margin-left: 1em; margin-right: 1em;" target="_blank"><img alt="English: George Osborne MP, pictured speaking ..." height="450" src="http://upload.wikimedia.org/wikipedia/commons/thumb/2/27/George_Osborne_0437.jpg/300px-George_Osborne_0437.jpg" style="border: none; font-size: 0.8em;" width="300" /></a><span class="zemanta-img-attribution" style="clear: both; float: left; margin-left: 1em; margin-right: 1em; width: 300px;">English: George Osborne MP, pictured speaking on the launch of the Conservative Party manifesto for the 2009 European Parliament elections, at Keele University. (805x1207 px, 283,711 bytes) (Photo credit: <a href="http://commons.wikipedia.org/wiki/File:George_Osborne_0437.jpg" target="_blank">Wikipedia</a>)</span></span><br />
<div class="introduction" id="story_continues_1" style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; font-size: 1.077em; font-weight: bold; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;"><br />
</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">Borrowing to cover the gap between spending and revenue was £600m in July,<a href="http://www.ons.gov.uk/ons/dcp171778_276550.pdf" style="color: #4a7194; font-weight: bold; line-height: 16px; text-decoration: none;">the Office for National Statistics said</a>. There was a surplus of £2.8bn in the same month a year earlier.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The Treasury blamed disappointing corporation tax receipts.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">Labour said the government's efforts to try to cut the deficit had "choked off the recovery".</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">Analysts suggest the government could end up borrowing about £30bn more than last year, when official forecasts had suggested borrowing would fall this year.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The Office for Budget Responsibility, the official UK economic forecaster, said there was still "significant uncertainty" about the outlook for borrowing this year.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">Four months into the financial year the government has borrowed £44.9bn, £9.3bn higher than the same period in 2011. That excludes banking interventions and the one-off boost in April from a transfer of Royal Mail pension assets to the public sector.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The OBR had predicted that borrowing on the same measure would be £120bn for the whole of the financial year, down from the £125bn borrowed last year.</div><span class="cross-head" style="background-color: white; color: #505050; display: block; font-family: Arial, Helmet, Freesans, sans-serif; font-weight: bold; line-height: 16px; margin: 0px 0px 16px; text-rendering: optimizelegibility;">Policy pressure</span><div class="videoInStoryC" style="background-color: white; clear: both; color: #505050; display: inline; float: right; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 16px; margin: 0px -160px 16px 16px; overflow: hidden; position: relative; width: 320px;"><div class="emp page-bookmark-link-aware" id="emp-19330964-47044" style="cursor: pointer; height: 180px; position: relative;"><img height="180" src="http://news.bbcimg.co.uk/media/images/62401000/jpg/_62401718_jex_1496478_de05-1.jpg" style="-webkit-user-select: none; border: 0px; font-style: italic; letter-spacing: 0px;" width="320" /><a href="" style="background-color: black; color: #1f4f82; display: block; font-weight: bold; height: 80px; left: 0px; margin-top: -40px; opacity: 0.75; position: absolute; top: 50%; width: 80px;" title="Click to play"></a><a href="" style="background-color: red; color: #1f4f82; display: block; font-weight: bold; height: 80px; left: 0px; margin-top: -40px; opacity: 0; position: absolute; top: 50%; width: 80px;" title="Click to play"></a><div style="background-image: url(http://emp.bbci.co.uk/emp/releases/worldwide/revisions/749603_749269_749444_5/cta_play.png); height: 36px; left: 26px; margin-top: -18px; position: absolute; top: 50%; width: 27px;"></div></div><div class="caption" style="clear: both; color: #333333; float: left; margin-bottom: 16px; margin-right: -160px; padding: 0px; position: relative; text-rendering: auto; width: 320px;">Labour MP Chris Leslie "The chancellor is borrowing to cover the cost of economic failure"</div></div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The government received 0.8% less in tax than a year earlier due to a drop in corporation tax receipts. Income tax, national insurance and VAT held up, while spending, which includes welfare payments, was more than expected.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">Labour said the figures were "a damning indictment of a chancellor who promised to secure the recovery and get the deficit down".</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">"[George Osborne's] failed plan has delivered the exact opposite - a double-dip recession which is leading to soaring borrowing," said Rachel Reeves, shadow chief secretary to the Treasury.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">A Treasury spokesman said: "The government remains committed to the credible plan we have set out to deal with Britain's debts."</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">One economist said the figures would lead to further calls for the government to change course.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">"We're going backwards not forwards," said economist Alan Clarke of Scotia Bank.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">"It's going to increase pressure on the government to get back on track either by tightening fiscal policy further to make up for the lost ground, or loosening policy in the hope that stronger economic growth improves the public finances."</div><span class="cross-head" style="background-color: white; color: #505050; display: block; font-family: Arial, Helmet, Freesans, sans-serif; font-weight: bold; line-height: 16px; margin: 0px 0px 16px; text-rendering: optimizelegibility;">Weak economy</span><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">July is usually a good month for tax receipts, meaning the government normally makes a surplus, because it is the month that businesses make quarterly corporation tax payments and individuals' tax self-assessment returns are recorded.</div><a class="hidden" href="http://www.bbc.co.uk/news/business-19329758#story_continues_2" style="background-color: white; color: #4a7194; font-family: Arial, Helmet, Freesans, sans-serif; font-weight: bold; left: -5000px; line-height: 16px; position: absolute; text-decoration: none; top: -5000px;">Continue reading the main story</a><div class="story-feature wide" id="economy_glossary" style="background-color: #f1f1f1; clear: right; color: #505050; display: inline; float: right; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 16px; margin: 0px -160px 16px 16px; overflow: hidden; position: relative; width: 304px;"><div class="glossary_header" style="padding: 7px 7px 0px;"><div class="title" style="font-weight: bold; line-height: 1.4em;">Crisis jargon buster</div><div class=""><div class="instructions" style="margin-bottom: 10px;">Use the dropdown for easy-to-understand explanations of key financial terms:</div><fieldset style="background-color: white; border-color: rgb(204, 204, 204); border-style: solid; margin: 0px; padding: 0px; position: relative;"><label style="-webkit-transition: color 0.2s ease-in; background-image: url(http://www.bbc.co.uk/view/1_3_3/cream/hi/shared/img/select-arrow.png); background-position: 100% 50%; background-repeat: no-repeat no-repeat; cursor: pointer; display: block; float: left; height: 14px; overflow: hidden; padding: 5px 38px 5px 5px; width: 243px;">Deficit</label></fieldset></div></div><div class="glossary_definition" style="background-color: white; border-color: rgb(241, 241, 241); border-style: solid; border-width: 0px 1px; margin-top: 16px; padding: 7px 7px 9px;"><div class="definition_title" style="color: #d1700e; font-weight: bold; margin-bottom: 10px;">Deficit</div><div class="definition_body">The amount by which spending exceeds income over the course of a year.<br />
In the case of trade, it refers to exports minus imports. In the case of the government budget, it equals the amount the government needs to borrow during the year to fund its spending. The government's "primary" deficit means the amount it needs to borrow to cover general government expenditure, excluding interest payments on debts. The primary deficit therefore indicates whether a government will run out of cash if it is no longer able to borrow and decides to stop repaying its debts.</div></div><div class="glossary_footer" style="padding: 7px;"><a href="http://www.bbc.co.uk/news/business-15060411" style="color: #4a7194; font-weight: bold; text-decoration: none;">Glossary in full</a></div></div><div id="story_continues_2" style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">But some said this month's figures should be treated with caution as corporation tax receipts are affected by the temporary closure of the Elgin gas field due to a leak.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The ONS also warned that the timing of self-assessment returns - which are recorded in August as well as July - makes direct comparisons between years difficult. More returns that usual may be recorded in August, as the deadline is the last day of July.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The previous months borrowing figures have also been worse than expected.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">"It's the same story we've been seeing since the beginning of the year, that tax receipts are down, which is not surprising given the weaker growth performance of the economy," said Gustavo Bagattini from RBC Capital Markets.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">Tom Vosa, an analyst at National Australia Bank, said although the monthly numbers were "terrible", "the trend so far isn't disastrous".</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">"Unless we see a further fall in revenue, the government could possibly still have a small undershoot for the fiscal year as a whole."</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The Office for National Statistics said net debt - the sum of all borrowing - was now £1.032bn, or 65.7% of GDP.</div><div style="background-color: white; clear: left; color: #333333; font-family: Arial, Helmet, Freesans, sans-serif; line-height: 18px; margin-bottom: 18px; padding: 0px; text-rendering: auto;">The ONS also revised the figure for how much the UK borrowed in the 2011-12 financial year to £125bn. The OBR had forecast £126bn.</div><br />
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