The Treasury was given a huge boost over its performance in the financial year to April, as the Office for Budget Responsibility revealed that they borrowed £107.7 billion during 2013/2014, substantially lower than the £115.1 billion the year before.
The OBR had previously set a target of £107.8 billion as the upper threshold the government could borrow, though the news that they have exceeded expectations will reinforce their claim that the budget deficit will be eliminated by 2017/2018.
The Office for National Statistics also revealed that total government borrowing had fallen to just £6.7 billion in March this year, compared to a monumentally higher £11.4 billion, as the effects of the coalitionís welfare reforms begin to manifest markedly on the countryís overall deficit.
Chancellor George Osborne will likely use the statistics as vindication for his series of welfare cuts and reforms implemented last year, which have garnered widespread criticism for negatively impacting the finances of the countryís lowest earners during a period where the cost of living has consistently outstripped the growth in wages.
Nevertheless, the government still has a great deal of work ahead of it if it endeavours to reduce the substantial deficit of £107 billion, whilst further cuts and reductions in the role of the state will likely be on the horizon as they seek to reduce total government debt, which currently stands at a monumental £1.2 trillion.
ëLong way to goí
The OBR also lowered their spending forecast for February, scaling it down to £8.8 billion from the previous £9.3 billion.
Their annual disclosure is the first forecast of the financial year, and will likely be modified as more insightful data is released for them to analyse.
The information does not take into consideration the impact made by the transfer of the Royal Mail pension scheme to the government, and the effects of the Bank of Englandís asset acquisition for quantitative easing.
The UK’s public sector net debt now stands at £1,268.7bn, or 75.8% of GDP. This suggests that despite the governmentís cuts on welfare spending in last year, that nevertheless the deficit has risen, with equivocal data at this time lat year indicating that the deficit was £1,185.2bn, or 74.2% of GDP.
The OBR has now estimated that the percentage ratio will reach a high point of 79% in 2015-16, after which it will begin to fall sharply.
Howard Archer, chief economist at Global Insight, said the Chancellor had substantially benefitted from ëthe March shortfall being limited to £6.7bn”.
“While in reality, it made little difference whether the chancellor just hit or just missed his fiscal target for 2013-14, the fact that he did make it provides a psychological boost for the government and it may support belief that he can hit his longer-term targets,” said Mr Archer.
“Nevertheless, a deficit of £107.7bn in 2013-14 highlights the fact that here is still an awfully long way to go in getting the public finances into decent shape.”
However, David Kern, chief economist at the British Chambers of Commerce (BCC), argued that despite the long way for the government to go to meaningfully address the deficit that the statistics nevertheless indicated that steady progress had been made to bring stability to public finance.
“However, bringing down our budget deficit remains a difficult task. Since the financial crisis, we have seen falls in oil and gas output and weaknesses in the financial sector,” he added.
“These structural changes have reduced the country’s ability to generate tax revenues, and future public spending must factor in these challenges.
“Although progress may be gradual, reducing our public sector debt is necessary, as it will help businesses drive the recovery, and create jobs and wealth