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Income tax windfall boosts public finances

By on March 24, 2015

A pick-up in income tax receipts for the second month in a row meant Government borrowing fell by more than expected in February.

Official figures from the Office for National Statistics showed that public sector net borrowing – excluding the effects of bank bailouts came in at £6.9bn last month, £3.5bn lower than in February 2014.

According to Sky News, the figure took the total in the financial year-to-date to £81.8bn, almost 10% down on the same time last year and leaving the Treasury on course to meet its revised borrowing target.

The independent Office for Budget Responsibility reduced its borrowing target for 2014/15 to £90.2bn in its latest forecast published alongside the Budget earlier this week.

However, the ONS was also forced to revise up the national debt after admitting a £5.5bn miscalculation over the Government’s bailed-out bank assets.

Treasury coffers have been boosted in January and February by a £1.9bn increase in self-assessment tax receipts.

This is partly explained by tax planning which saw individuals defer paying tax on bonuses ahead of the cut in the top rate of income tax from 50 per cent to 45 per cent.

Income tax receipts for the first 11 months of the financial year were up to a record £153.9bn, the ONS said.

A Treasury spokesman said of the borrowing figures: “The plan is working: the deficit is halved as a share of the economy and the OBR’s latest forecasts show borrowing continuing to fall in every year, with debt falling a year earlier in 2015-16.

“But we are still borrowing £1 for every £10 we spend and have more to do”.

Labour has accused the Government of placing public services at risk through cuts to meet its borrowing plans in the next Parliament.

Meanwhile, George Osborne has dismissed fears over spending cuts to public services raised by the Office for Budget Responsibility.

Osborne said the cuts were necessary but did not pinpoint exactly where the axe would fall.

He said, “People know that we have been careful with public money, we want to go on doing that at the same pace we have been doing that over the next couple of years.”

The Office for Budget Responsibility report released on the day of the Budget says the Conservatives’ cuts leave “a rollercoaster profile of implied public services spending through the next parliament”.

The OBR report projects a “much sharper squeeze” on spending in 2016-17 and 2017-18, which would be followed by a sharp increase in 2019-20.

Discussing his plans for a further £12bn welfare savings cuts, Osborne said: “I’m not suggesting that these things are easy, but they are necessary if we are going to go on living within our means.

“We’ve saved £21bn in this parliament and we need £12bn in the next … People can judge me by my track record.

“I’m a Chancellor who’s made these sensible, balanced decisions and we can see the benefits in this massive moment for the UK, when debt as a share of national income is falling.”