George Osborne will face a number of difficulties when it comes to meeting his borrowing targets, according to a number of experts.
The ONS (Office for National Statistics) has reported that the surplus in public finances has now risen to £11.2bn after a £1bn increase in the January public finances surplus.
This marks the largest surplus in January public finances since January 2008. However, it still falls short of the £12.6bn that many economists had forecast.
The OBR (Office for Budget Responsibility) stated that the year still presented “considerable uncertainty” with regards to public finances.
According to the Office for National Statistics, the level of government borrowing for this tax year (April 2015 to January 2016) was only £66.5bn. This marks a £10.6bn decrease on the level that was seen at this time last year.
The Office for Budget Responsibility now predicts that the UK government will borrow a total of £73.5bn in the financial year leading up to March. This means that the chancellor, George Osborne, will have to borrow no more than £7bn in February and March in order to stick to this prediction. The total amount borrowed in those two months last year was more than double that at a total of £14.8bn.
A statement from the OBR said that there was still much work to be done in order to stick to the original target:
“Our November forecast does assume stronger growth in receipts in the remainder of the year (particularly income tax and stamp duty land tax), but local authority borrowing as measured in the statistical bulletin looks likely to exceed our November forecast.”
A individual from Capital Economics, Paul Hollingsworth, commented saying that George Osborne still has “some work to do over the next few months if he still wants to meet this forecast”.
The Chancellor of the Exchequer took to Twitter to say:
“With warnings of weaker economic outlook & challenges for future tax receipts this could bring, we can’t be complacent & think job is done.”
Anthony Reuben is a business reporter from the BBC. He believes that George Osborne faces a difficult challenge if he still wants to meet the forecast set out by the OBR. He went on to say:
“Two months before the end of the financial year, the government is going to have a tricky task trying to meet the OBR’s forecast from November.
It’s not impossible, but the government would have to borrow £7bn in two months, when last year it borrowed £7bn in each month.
This is the last set of borrowing figures we’re going to get before the Budget on Wednesday 16 March, when we will also get a fresh forecast from the OBR.
The November forecast was a slight cut from the July forecast (once you adjust for the inclusion of housing association debt), and it would now not be a great surprise to see the forecast bounce back.”
The reason that January tends to see a surplus in public finances is the fact that there are normally a high number of income tax receipts filed at this time of the year.
This January was also the first time that debt from housing associations was included in the figures because it is the first time that they have been considered to be “under government control”.
This alteration has added around £3.6bn to the total level of government borrowing in the year from April 2014 to March 2015.
This news comes at the same time as the Office for National Statistics revealed that the number of retail sales in January increased by 2.3%, which was more than was originally predicted. This helped rectify the 1.4% decrease that was seen in December and took the total up by 5.2% for the year.
The ONS also stated that this month marked the 34th in a row in which department stores had posted year-on-year growth. This represents the longest continuous period of growth for department stores since the beginning of the economic crash back in 2008.
The managing director of the retail section of Lloyds Bank, Keith Richardson, said that a cold period of weather in January meant that more people were shopping for winterwear such as hats, gloves and jumpers. This, combined with the number of people that were out shopping in the January sales, helped boost retail figures.
Mr Richardson said:
“Online sales continued to soar, rising 10% year-on-year even as footfall rose, suggesting that those with sophisticated online and mobile operations are now attracting new customers from overseas,”