UK’s budget deficit swelled to record in Nov
LONDON: Britain's budget deficit swelled to a record in November, underscoring the challenge facing Prime Minister David Cameron as his government prepares to implement the deepest spending cuts since World War II.
Net borrowing was 22.8 billion pounds ($35.4 billion), compared with 16.7 billion pounds a year earlier, the Office for National Statistics said in London today. The median of 12 forecasts in a Bloomberg News survey was 16.8 billion pounds. Spending rose the most since February. The shortfall excluding government support for banks was 23.3 billion pounds.
Business Secretary Vince Cable said there was a "constant battle going on behind the scenes" between his Liberal Democrats and the Conservatives over how to reduce the budget shortfall. As Britons brace for spending cuts and tax increases, Cable's comments to undercover newspaper reporters from the Daily Telegraph newspaper illustrate Cameron's struggles to hold the coalition government together.
"The figures reinforce the need for fiscal consolidation," Philip Shaw, chief economist at Investec Securities in London, said in a telephone interview before the report. In 2011, "there should be a much more noticeable improvement in public finances if the economy manages to withstand the cuts, which we think it will."
The pound pared its gain against the dollar after the report and was at $1.5522 as of 9:32 a.m. in London, little changed from yesterday. Bonds declined, with the yield on the benchmark two-year gilt up 3 basis points at 1.187 percent. Revenue rose 3.1 percent in November from a year earlier, the least this year, held back by repayments of value- added tax to companies, the statistics office said. Government spending jumped 10.8 percent, led by EuropeanUnion payments and expenditure on health, defense and local government services.
In the first eight months of the fiscal year that began in April, revenue increased 8.2 percent, while spending rose 6.8 percent. The deficit in the period excluding financial interventions narrowed to 104.4 billion pounds from 105.1 billion pounds a year earlier. There was a public-sector cash requirement of 16.8 billion pounds in November, compared with 14.8 billion pounds a year earlier. Economists predicted 12.3 billion pounds. The central-government cash deficit, the measure the Treasury says most closely indicates gilt sales, was 14.4 billion pounds. Net debt was at 58 percent of gross domestic product, up from 50 percent a year ago. -PB News