UK Budget Deficit Narrows In April

The UK budget deficit narrowed from last year in April, but the shortfall was the fourth-highest on record, the Office for National Statistics said on Tuesday.

Public sector net borrowing, excluding banks, decreased by GBP 5.6 billion to GBP 18.6 billion in April. Borrowing remained below the estimate of the Office for Budget Responsibility by GBP 0.5 billion.

Nonetheless, this was the fourth-biggest shortfall since records began in 1993 and also exceeded the economists’ forecast of GBP 17.8 billion.

Data showed that central government receipts were up 16.5 percent, while expenditure dropped by 4.5 percent.

Public sector net debt excluding public sector banks totaled GBP 2,347.7 billion at the end of April, or around 95.7 percent of GDP.

In the financial year ending March, public sector borrowed GBP 144.6 billion, about GBP 16.8 billion more than the GBP 127.8 billion forecast by the OBR in the economic forecast published in March.

Data suggests that after just one month of the 2022/23 fiscal year the Chancellor is on track to undershoot the OBR’s full-year borrowing forecast of GBP 99 billion, Paul Dales, an economist at Capital Economics, said.

“That said, we suspect that the effects on the public finances of higher inflation, higher interest rates and weaker GDP growth will prevent a big undershoot this year and may in fact erode some of the £27bn (1.0% of GDP) of headroom the Chancellor has against his main fiscal mandate,” Dales added.

As such, the economist said the upcoming support package for households will probably be mostly funded by raising taxes elsewhere and will be targeted towards those households that need it most.

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