Britain posted a larger-than-predicted budget deficit in February, leaving Chancellor of the Exchequer George Osborne little room to meet his full-year fiscal forecast.
Government spending exceeded revenue by £7.1 billion ($10.1 billion) compared with 7.5 billion pounds a year earlier, figures from the Office for National Statistics show. Economists in a Bloomberg survey had predicted a £5.9 billion-shortfall.
In the first 11 months of the fiscal year, the deficit was 70.7 billion pounds. It means the shortfall for the final month needs to come in at 1.5 billion pounds or less to meet the 72.2 billion pounds forecast by the Office for Budget Responsibility last week. March last saw a deficit that small in 2004.
The OBR had not seen the latest figures when it issued its new projections on March 16, the ONS said. The watchdog trimmed its forecast for 2015-16 but added £36.4 billion to the deficit for the next three years because of a worsening economic outlook.
The main figures show:
Government revenue rose 5.4 percent in February and spending fell 1.6 percent. Final payments of self-assessed income tax receipts spilled over into February. In January and February together, self-assessment rose by 400 million pounds to a record 15.5 billion pounds. Central government net cash requirement totaled £59.8 billion in first 11 months of 2015-16. Full-year shortfall estimated at 75.5 billion pounds. In February, receipts rose across the board, with value-added tax increasing 3.2 percent, income tax and capital gains climbing 6.5 percent and corporation tax up 11.5 percent. Stamp duty on property purchases jumped 24 percent and self-assessment was up 11 percent. Central-government spending driven down by a 26 percent decline in transfers to local government. Other costs increased. Net investment rises to £4.5 billion from 4.1 billion pounds year earlier. The deficit on current budget narrows to 2.6 billion pounds from 3.4 billion pounds. January budget surplus revised to 13.8 billion pounds from 11.2 billion pounds. Upward revisions to receipts and downward revisions to spending. February net debt was 83.1 percent of gross domestic product compared with 82.9 percent a year earlier.
U.K. Inflation Rate Remains at 0.3%
The U.K.’s inflation rate was unexpectedly unchanged in February, remaining far below the Bank of England’s 2 percent goal.
Annual consumer-price growth was at 0.3 percent, the Office for National Statistics said in London on Tuesday. Economists had forecast an acceleration to 0.4 percent. Core inflation, which excludes volatile food and energy prices, held at 1.2 percent.
Inflation has been below the BOE’s target for more than two years, largely due to lower oil prices. With Governor Mark Carney warning about international risks to the U.K. economy, weak price growth is giving him leeway to keep interest rates at a record low. Pacific Investment Management Co. said its base case is for no U.K. rate increase this year, and it even sees a greater risk of a cut.
ONS statistician Phil Gooding said U.K. inflation remains around “historically low levels.” The rate hasn’t been higher than 0.3 percent since 2014. The biggest downward contribution to inflation in February came from transport costs, including bicycles and used cars.
On the month, consumer prices rose 0.2 percent in February, less than economists had forecast.
According to another inflation measure, the RPI, prices rose 1.3 percent last month compared with a year earlier, matching the median forecast in a Bloomberg survey.
A separate report showed output prices at factories rose 0.1 percent in February from January and dropped 1.1 percent on the year.