Budget Deficit is Narrowing after Boost from Duties and Taxes
The public sector budget deficit in Britain was helped by lower interest bills on the government debt as well as a decrease in Whitehall spending in April.
Government Borrowing & Spending Dropped
The Office for National Statistics recently said that government borrowing was down almost 27 percent at £6.8b from the previous year. The budget deficit is narrowing which gives chancellor George Osborne the boost he needs as he aims to fix the public finances in the UK.
Income tax revenues also had a big rise to £11.6b last month, which was the biggest amount in April for two years as the economic recovery in the UK translates into more tax receipts.
Central government spending decreased, which included an almost 7% decreases in interest payments as the extremely low inflation in Britain reduced the bill the government has for inflation-linked bonds.
National Budget Deficit To Be Eliminated By 2019
Osborne is hoping to completely eliminate the national deficit by either 2018 or 2019 after the unexpected Conservative win during the May election, which paved the way for even further cuts to spending.
He had originally hoped to wipe the deficit by 2015, although he did manage to halve it to under 5% of the GDP. We can expect to see his new budget on the 8th of July, and the chancellor has promised more cuts to government departments and welfare spending.
Many economists have expressed scepticism that Osborne can wipe the deficit without subsequently raising taxes, and a senior economist at Capital Economics, Samuel Tombs said that while April’s figures are bringing more good news when it comes to the public finances, it’s unlikely that the pace of spending cuts can possibly be maintained over the coming months.
While the deficit is under 5%, it’s still one of the highest in the developed world. Frances O’Grady (TUC general secretary) said that the extreme cuts will put the recovery at risk, leaving hospitals, schools and other services without vital and much needed revenues.