Roundup: British public fiscal deficit increases, outlook mixed

The net borrowing of the British public sector amounted to 13.1 billion pounds (about 20 billion U.S. dollars) in December 2014, compared with 10.3 billion pounds a year earlier, said the Office for National Statistics (ONS) Thursday.

Economists attributed the bounce-back of deficit scale to temporary factors.

The scale of public deficit is bigger than the market expectation consensus. Analysts believe that the 2.9 billion pounds contribution to the European Union budget pushed up spending.

From April to December 2014, public sector net borrowing excluding public sector banks was 86.3 billion pounds, a decrease of 0.1 billion pounds compared to the same period a year earlier, data showed.

At the end of December, Britain's public sector net debt excluding public sector banks was 1,483.3 billion pounds, equivalent to 80.9 percent of gross domestic product (GDP), figures also showed. It was 94.6 billion pounds higher than that of a year earlier.

In December, the Office of Budget Responsibility (OBR) raised its fiscal deficit forecast for the fiscal year 2014-15 (began in April 2014) from 86.6 billion pounds to 91.3 billion pounds.

POSITIVE BUT NOT ROSY

Martin Beck, senior economic adviser to the EY ITEM Club, comments in a note that December's borrowing number was distorted by an upward adjustment to the Britain's contribution to the EU budget.

The London-based economic think tank believes that some positive developments on the revenue side should improve British government's fiscal position. These developments comprise of income tax receipt increase, strong growth in capital gains, tax receipts and debt interest payments drop.

But Samuel Tombs, Senior UK Economist at Capital Economics, noted that growth in tax receipts has remained disappointingly weak, with total receipts were no higher in December than they were a year ago.

"The failure of borrowing to come down much at all despite the economy's recent strength raises serious doubts as to whether the next government will be able to achieve the much bigger planned reductions in future years," he said.

David Kern, Chief Economist at the British Chambers of Commerce (BCC), also believes the current trends suggest that it will be difficult for the UK government to meet its target for this fiscal year, although there could be a significant improvement when January figures are published next month. (1 pound = 1.52 U.S. dollars) Endit