Public finance bulletin: July 2014

Today the Office for National Statistics and HM Treasury published Public Sector Finances June 2014. 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 2014–15.

Headline Comparisons

• Central government current receipts in June were 4.7% higher than in the same month last year, excluding the impact of transfers related to the Asset Purchase Facility (APF). Taking receipts over April to June together, these were 1.6% higher than in the same three months of 2013. This is lower than the 5.0% growth forecast for the year as a whole by the OBR at the time of the March 2014 Budget, but there is good reason to believe that the average growth in receipts will be higher over the remainder of the financial year. Receipts in the early months of last year were particularly high for two reasons. First, the Exchequer received £0.9 billion from a tax on Swiss bank accounts. Second, some high income individuals responded to the reduction in the top rate of income tax in April 2013 by shifting income from the 2012–13 tax year into 2013–14. These have the effect of depressing the growth in receipts in the early months of 2014–15.
• Central government current spending in June was 4.0% higher than in the same month last year, and taking the first three months of this financial year together, spending has been 1.0% higher than in the same months of 2013. This is lower growth in spending than the 2.0% increase forecast by the OBR in March for the year as a whole.
• Public sector net investment in June was £1.5 billion, £0.4 billion more than was spent in June last year. Together, public sector net investment between April and June 2014 has been £4.3 billion. This is £1.0 billion higher than over the same three months in 2013. The OBR’s March 2014 forecast was for net investment over the whole of 2014–15 to be £27.9 billion, which is 12.8% above last year’s level (£24.7 billion).
• Public sector net borrowing in June was £11.4 billion, similar to the £11.5 billion borrowed in the same month of last year once cash flows relating to the APF are excluded. On the same basis borrowing for the first three months of this financial year has been 7.3% higher than over the same period last year. This compares unfavourably with the 11.4% fall in borrowing forecast for the year as a whole by the Office for Budget Responsibility (OBR) in March 2014, but the comparison between borrowing this year and last is also affected by the unusually high receipts from taxes on high income individuals and from the Swiss capital tax in the early months of 2013–14. Over the rest of the financial year the comparison between borrowing this year and last is likely to look more favourable.