Public finance bulletin: December 2012

Today the Office for National Statistics and HM Treasury published Public Sector Finances November 2012. We now have details of central government receipts, central government spending, public sector net investment, borrowing and debt for the first eight months of financial year 2012−13.

Rowena Crawford, a Senior Research Economist at the IFS, said:

“Two weeks ago the Office for Budget Responsibility revised down the official forecasts for tax receipts this year. Today’s figures confirm that receipts from many of the major taxes continue to grow slowly, with receipts from income tax, national insurance and capital gains tax being only 0.5% higher so far this financial year than they were over the same months last year.

The OBR also revised down their forecast for spending by central government departments – in particular, assuming that they will underspend their budgets for day-to-day spending by £4.5 billion this year. However, so far this year central government current spending, excluding that on welfare and debt interest, has grown by 2.5%. The OBR’s forecast for the year as a whole is for growth in this component of spending of just 1.3% which, to be correct, would require spending to be 0.8% lower over the remaining four months of this financial year than it was over the same months last year.”

Headline Comparisons

• Central government current receipts in November were 0.6% higher than in the same month last year. Receipts between April and November 2012 were 0.1% lower than in the same months of 2011. The Office for Budget Responsibility’s (OBR) latest Economic and Fiscal Outlook, published earlier this month, forecast an increase in receipts relative to last year’s levels of 1.2% for the year as a whole and of 3.0% for the period from November 2012 to March 2013 (excluding the impact of financial transactions relating to the Asset Purchase Facility, Bradford and Bingley, and Northern Rock Asset Management). This is significantly lower than the 3.6% growth for the year as a whole previously forecast by the OBR at the time of the March 2012 Budget.

• Central government current spending in November was 6.3% higher than in the same month last year. Spending between April and November 2012 was 2.8% higher than in the same months of 2011. The OBR’s latest forecast implies an increase relative to last year’s level of 2.5% for the year as a whole and of 2.7% for the period from November 2012 to March 2013 (excluding the impact of financial transactions relating to Bradford and Bingley, and Northern Rock Asset Management). This is slightly lower than the 3.0% growth for the year as a whole previously forecast by the OBR at the time of the March 2012 Budget.
• Public sector net investment in November was £1.7bn, £0.2bn higher than was spent in November 2011. Public sector net investment between April and November 2012 has been £9.5bn (excluding the impact of the transfer of assets from the Royal Mail Pension Plan to the public sector), which is 19% lower than in the same eight months of 2010. The OBR’s latest forecast was that net investment in 2011–12 would be £18.9bn (excluding the impact of financial transactions relating to the Asset Purchase Facility, Bradford and Bingley, Northern Rock Asset Management and Royal Mail), which is 33% below last year’s level.