Today the Office for National Statistics and HM Treasury published Public Sector Finances August 2011. We now have details of central government receipts, central government spending, public sector net investment, borrowing and debt for the first five months of financial year 2011-12.
Rowena Crawford, a Research Economist at the IFS, said: "The good news for the Treasury in today's figures is that the estimate for borrowing last year has been revised down by £6 billion, thanks in large part to £4 billion lower spending by local authorities than previously thought. The bad news is that, for a third consecutive month, tax receipts have been weak. The latter increasingly suggests that borrowing this year could overshoot the official forecast. That said, with only five months of data currently available, much uncertainty remains. A significant pick-up in tax receipts over the coming months or an undershoot on investment spending could lead to the OBR's forecast still proving correct, but it is also possible that the deficit this year could even exceed the deficit last year."
Commenting on speculation today that government ministers are considering a boost of up to £5 billion to planned capital spending, Carl Emmerson, Deputy Director of the IFS, said: "An extra £5 billion, if spent in one year, would be a large proportional increase in investment spending: Budget 2011 forecast around £30 billion of net investment both this year and next. The OBR's model suggests that the impact of this would be to boost national income in the first year by around 0.3%, assuming no offsetting monetary policy response. History suggests that a key challenge would be to ensure that the money was spent productively and in a timely manner. It would also be important to ensure that increasing spending in this way did not damage confidence in the UK's commitment to reducing the deficit to sustainable levels over the medium term."
- Central government current receipts in August were 5.9% higher than in the same month last year. Receipts over the five months April to August 2011 were 4.6 % higher than in the same months of 2010. The OBR forecast at the time of the March 2011 Budget implied that central government current receipts would grow by 6.9% over the whole of 2011−12. The growth in receipts so far this year looks artificially weak because of the different timing of two bank taxes - the temporary Bank Payroll Tax generated receipts in April 2010 while receipts from the new Bank Levy have only started to come in from July 2011. Although taking these into account improves the picture somewhat, underlying growth in receipts so far this year is still below what the OBR's forecast suggests for the year as a whole.
- Central government current spending in in August was 7.2% higher than in the same month last year. Spending between April and August was 3.8% higher than in the same months of 2010. The OBR's forecast at the time of the March 2011 Budget implied that central government current spending for the whole of 2011-12 would be 3.6% above 2010-11 levels.
- Public sector net investment in in August was £2.1bn, £0.3bn lower than in August 2010. Together, public sector net investment between April and August 2011 has been £8.0bn, which is 27% lower than in the same five months of 2010. The OBR's forecast at the time of the March 2011 Budget predicted that net investment in 2011-12 would be £31.8bn, which is 18% below last year's level.