George Osborne accused of ignoring the deficit as government borrowing remains high
The government's cash shortfall edged down slightly in May, though not enough to put a significant dent in its still-hefty budget deficit.
Public sector net borrowing – the amount the government has to borrow to cover the difference between its income and spending – was £9.7bn in May, four per cent down on the same month last year, figures released by the Office for National Statistics (ONS) this morning showed.
However, the slight fall did not offset higher government borrowing in April, leaving the government's deficit – in cash terms – higher for the first two months of this financial year than the previous one. The government borrowed a total of £17.9bn in April and May, up £0.2bn on 2015/16.
Public sector net borrowing has been coming down since the height of the crisis. Months with negative figures show the crucial months when self-assessment tax returns are included in the figures. The chancellor will be hoping for a bumper performance when the next set comes through in July.
The chancellor was accused of letting the EU referendum get in the way of bringing down the deficit by the Institute for Chartered Accountants (ICAEW).
Ross Campbell, public sector director at the ICAEW said: "It was imperative that the chancellor put public sector finances at the top of his priority list … an increase in public sector net borrowing … illustrates that he has done quite the opposite and has taken his eye off the economic ball."
If the government is to hit its deficit reduction forecasts outlined by the Office for Budget Responsibility (OBR), "the chancellor will need a combination of faster growth and tighter spending control during the rest of the year," John Hawksworth, chief economist at PwC said.
Public sector net borrowing for the month of May has still not returned to its pre-crisis levels
The OBR has predicted a borrowing requirement of £55.5bn for 2016/17 – 26 per cent down on last year.
In a small blip of good news for the chancellor, however, the estimate for how much the government borrowed last year was cut slightly. The ONS now believes the government borrowed £74.9bn, compared to its previous estimate of £76bn.
The Centre for Economics and Business Research, however, was still damning on Osborne's chances of eliminating the deficit by the end of the decade. Alasdair Cavalla, a senior economist said:
"George Osborne will not make his target for balancing the books by 2020: that much is already clear. Caught in a bind between promises to raise tax thresholds, vast areas of ring-fenced spending and a weak outlook for economic growth, the Chancellor is expected to miss his self-imposed target."