Borrowing by the UK government increased by more than expected in June 2012 as the economy remained weak, official figures revealed today.
Estimates from the Office for National Statistics (ONS) show that public sector net borrowing, excluding financial sector interventions such as bank bailouts, rose to GBP14.4bn last month from GBP13.9bn in June 2011.
Tax revenues increased in the month by 3.6% to GBP40.9bn but total government spending only dipped by less than 1% to GBP52.4bn.
This second consecutive monthly increase in borrowing makes it harder for Chancellor George Osborne to hit his deficit reduction targets, as the government needs to be borrowing less than last year. In the last financial year government borrowing totalled GBP125.7bn, revised down from the earlier estimate of GBP127.6?bn, and the Chancellor is hoping to reduce borrowing in 2012/2013 to GBP120bn.
A Treasury spokesperson said today that it was too early to conclude what total borrowing for the current financial year would be, as the data is volatile and prone to revision.
On Thursday the IMF said that the UK government should ease its austerity measures if the recovery continues to stall, suggesting that a ‘Plan B’ should be introduced in early 2013 if the economy fails to bounce back. Specifically, it recommended targeted tax cuts and increased spending on infrastructure to support growth, as well as reform of the welfare system.
However, the IMF also welcomed recent initiatives such as the GBP50bn UK Guarantees scheme to attract investment in infrastructure projects and support exports.