|Date:||22 January 2015|
|Authors:||Soumaya Keynes and Gemma Tetlow|
|Publisher:||Institute for Fiscal Studies|
Today the Office for National Statistics and HM Treasury published Public Sector Finances December 2014. We now have details of central government receipts, central government spending, public sector net investment, borrowing and debt for the first nine months of financial year 2014−15.
Soumaya Keynes, a Research Economist at the IFS, said:
“Borrowing in December 2014 was £2.9 billion higher than in December 2013. However, the increase is entirely explained by a one-off payment to the European Union of £2.9 billion becoming due; part of which is expected to be offset by later rebates. Over the last nine months borrowing has not fallen as quickly as the OBR are expecting for the year as a whole but there are a number of reasons to think that their forecast will still prove correct – not least that receipts of self-assessment income tax in January are expected to be much higher than they were last year. Next month’s figures will shed considerably more light on the likely outturn for the year as a whole.”
What would happen if these trends continued?
We should be cautious of inferring or extrapolating likely outcomes over the financial year as a whole from information on only the first nine months, particularly as some factors are likely to affect the profile of receipts and spending differently in 2014–15 than in 2013–14. However, bearing this in mind, the figures for receipts and spending in December 2014 show:
Central government current receipts
Accrued receipts from income tax, capital gains tax and National Insurance contributions for December 2014 were 2.1% higherthan in the same month last year. The latest OBR forecasts imply that the receipts from these taxes will be 3.1% up on last year’s levels over the whole year and 3.6% up over the period from November 2014 to March 2015. Together, the receipts for these taxes during the first nine months of 2014−15 were 2.1% higherthan those for the same months of 2013−14, while the receipts for November and December 2014 were 3.6% higher than the same two months of 2013.
Accrued receipts of VAT in December 2014 were 0.9% lowerthan the same month last year. This rather weak growth may in part reflect Black Friday leading to consumer purchases being brought forward from December to November: VAT receipts grew strongly in November, with receipts being 4.8% higher than in November 2013. Taking November and December together, VAT receipts were 1.9% higher in these two month in 2014 than in 2013. The OBR’s Autumn Statement forecasts imply that the receipts from this tax will be 3.1% up on last year’s levels over the whole year and 1.6% up over the period from November 2014 to March 2015. Together, accrued VAT receipts during the first nine months of 2014−15 were 3.6% higherthan those for the first nine months of 2013−14.
Cash corporation tax receipts for December 2014 were 12.1% higherthan the same month last year. However, only a small fraction of annual corporation tax payments are received in December. The OBR’s Autumn Statement forecasts imply that the receipts from this tax will be 3.9% up on last year’s levels over the whole year and 9.4% up over the period from November 2014 to March 2015. Corporation tax receipts between April and December 2014 were 5.0% higherthan in the same months of 2013, while receipts for November and December 2014 were 9.4% higher than the same two months of 2013. A clearer picture for Corporation Tax receipts this year will emerge next month when figures for receipts in January 2015, which is normally a significant month for these receipts, are published.
Central government current spending
Expenditure on net social benefits was 3.2% higher in December 2014 than in December 2013. Expenditure between April and December 2014 was 2.8% higher than in the same months of 2013, while spending in November and December 2014 was 3.0% higher than in the same two months of 2014. The latest OBR forecast implies that this spending will be 3.1% up on last year’s levels over the whole year and 3.7% up over the period from November 2014 to March 2015.
Spending on debt interest was £3.9 billion in December 2014, £0.3 billion more than in December 2013. Total spending on debt interest between April and December 2014 was £38.4 billion. Last month the OBR forecast that total debt interest spending by central government in 2014–15 would be £48.1 billion.
Other current spending by central government, including spending on the delivery of public services, was 5.4% higher in December 2014 than in December 2013. The OBR’s Autumn Statement forecast implies that this spending will be 1.2% higher than last year’s levels over the whole year and 0.7% higher over the period from November 2014 to March 2015. Expenditure between April and December 2014 was 2.0% higher than in the same months of 2013, while spending in November and December 2014 was 3.1% higher than in the same two months of 2013. However, these comparisons should be treated with caution as the timing of departmental spending can change, distorting the overall spending growth rates. Furthermore, the OBR expects this component of spending to be depressed by a refund from the European Commission at some point in the last three months of this financial year.
Further information and contacts
Next month’s public finances release is due to be published on Friday 20th February 2015.
The IFS Green Budget – analysing the issues and challenges facing George Osborne as he prepares for the coalition government’s final Budget of this parliament – will be launched at the University of London’s Senate House on Wednesday 4th February 2015. The 2015 Green Budget, in association with ICAEW and funded by the Nuffield Foundation, will incorporate analysis of global and UK economies produced by analysts from Oxford Economics. For more details see http://www.ifs.org.uk/events/1110.
This, and previous editions of this press release, can be downloaded from http://www.ifs.org.uk/publications/browse?type=pf
Office for National Statistics & HM Treasury, Public Sector Finances, December 2014: http://www.ons.gov.uk/ons/rel/psa/public-sector-finances/december-2014/stb-dec-2014.html
Office for Budget Responsibility analysis of monthly Public Sector Finances, December 2014: http://budgetresponsibility.independent.gov.uk/category/topics/monthly-public-finance-data/
Useful links and background information on Autumn Statement 2014 can be found at: http://www.ifs.org.uk/tools_and_resources/budget/498
Office for Budget Responsibility, Economic and Fiscal Outlook, December 2014: http://budgetresponsibility.org.uk/economic-fiscal-outlook-december-2014/
HM Treasury Autumn Statement 2014: https://www.gov.uk/government/topical-events/autumn-statement-2014
Notes to Editors:
1. Central government current spending includes depreciation.
2. Where possible we compare figures on an accruals basis with the Office for Budget Responsibility forecast.