Public finance bulletin: July 2013

Today the Office for National Statistics and HM Treasury published Public Sector Finances June 2013. We now have details of central government receipts, central government spending, public sector net investment, borrowing and debt for the first three months of financial year 2013–14.

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

“Today’s figures add to a complicated picture. Both receipts and spending by central government have grown more rapidly so far this year than was forecast by the Office for Budget Responsibility for the year as a whole, but both are affected by timing changes. Spending by central government includes transfers to local government, which have been much more frontloaded in this financial year than previously, while particularly high income tax receipts at the start of this financial year are likely to reflect some high income individuals moving part of their income from the last tax year into the current tax year so as to benefit more from the reduction in the top rate of income tax from 50p to 45p.

These timing effects illustrate the difficulties in inferring the likely outcome for borrowing in 2013–14 from only three months’ data. That said, the government is likely to take some heart from June’s figures, which show that combined receipts from income tax, national insurance and capital gains tax grew in line with the forecast for the year as a whole. Benefit spending has also grown broadly in line with that forecast for the year, while other spending by central government, excluding that on debt interest, has grown less rapidly than forecast. However, VAT receipts were weak last month.”

Headline Comparisons

• Central government current receipts in June were 3.0% higher than in the same month last year, excluding the impact of transfers related to the Asset Purchase Facility. Receipts between April and June were 5.3% higher than in the same months of 2012. The Office for Budget Responsibility’s (OBR’s) forecast at the time of the March 2013 Budget implied that central government current receipts on this basis for the whole of 2013–14 would be 3.0% above 2012–13 levels.

• Central government current spending in June was 1.8% higher than in the same month last year. Spending between April and June was 4.5% higher than in the same months of 2012. The OBR’s forecast at the time of the March 2013 Budget implied that central government current spending for the whole of 2013–14 would be 2.2% above 2012–13 levels.
• Public sector net investment in June was £1.5bn, £0.2bn more than was spent in June last year. Together, public sector net investment between April and June 2013 has been £4.0bn. This is £0.5bn higher than over the same months in 2012, excluding the impact of the transfer of assets from the Royal Mail Pension Plan to the public sector. The OBR’s forecast at the time of the March 2013 Budget predicted that net investment over the whole of 2013–14 would be £24.2 billion, which is 5.6% above last year’s level excluding the impact of Royal Mail.