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| Labour blasts 'failing' government after UK deficit jumps in June – as it happened | Labour blasts 'failing' government after UK deficit jumps in June – as it happened |
| (4 months later) | |
| And finally, here’s our updated news story: | And finally, here’s our updated news story: |
| That’s probably all for today. Thanks for reading and commenting. GW | That’s probably all for today. Thanks for reading and commenting. GW |
| Tim Wallace of the Daily Telegraph points out that the government did rake in more tax receipts this week, but not enough to keep pace with higher borrowing costs. | Tim Wallace of the Daily Telegraph points out that the government did rake in more tax receipts this week, but not enough to keep pace with higher borrowing costs. |
| The Government’s tax haul is on the rise as the economy grows - so far this financial year current tax receipts have come in at £164.2bn, up 4.7pc on the £156.8bn raised last year. | The Government’s tax haul is on the rise as the economy grows - so far this financial year current tax receipts have come in at £164.2bn, up 4.7pc on the £156.8bn raised last year. |
| However, total current spending has risen by 5.6pc to £176.7bn, so the Government has had to borrow more to plug that widening gap. | However, total current spending has risen by 5.6pc to £176.7bn, so the Government has had to borrow more to plug that widening gap. |
| Higher interest payments on the national debt were a particularly large cost. | Higher interest payments on the national debt were a particularly large cost. |
| Financing the debt cost £4.9bn in June alone, a rise of more than £1bn from £3.7bn in the same month of 2016. | Financing the debt cost £4.9bn in June alone, a rise of more than £1bn from £3.7bn in the same month of 2016. |
| Andy Bruce and William Schomberg of Reuters say the deficit figures are a ‘headache’ for chancellor Philip Hammond: | Andy Bruce and William Schomberg of Reuters say the deficit figures are a ‘headache’ for chancellor Philip Hammond: |
| Hammond has come under pressure from within the ruling Conservative Party as well as from the opposition Labour Party to loosen his grip on public spending, chiefly by relaxing a cap on pay for public workers. | Hammond has come under pressure from within the ruling Conservative Party as well as from the opposition Labour Party to loosen his grip on public spending, chiefly by relaxing a cap on pay for public workers. |
| Spending on debt interest jumped an annual 33 percent in June to 4.9 billion pounds, the highest for any month of June since 2011, reflecting a sharp rise in inflation which has pushed up the cost of index-linked bonds for the government. | Spending on debt interest jumped an annual 33 percent in June to 4.9 billion pounds, the highest for any month of June since 2011, reflecting a sharp rise in inflation which has pushed up the cost of index-linked bonds for the government. |
| The deficit was also widened by higher payments to the European Union budget and bigger purchases of goods and services by the government. | The deficit was also widened by higher payments to the European Union budget and bigger purchases of goods and services by the government. |
| Lucy Meakin of Bloomberg says today’s figures show the risks facing the public finances. | Lucy Meakin of Bloomberg says today’s figures show the risks facing the public finances. |
| The figures may raise fresh questions about whether Chancellor of the Exchequer Philip Hammond can limit borrowing to £58bn this year, as forecast by his budget watchdog in March. | The figures may raise fresh questions about whether Chancellor of the Exchequer Philip Hammond can limit borrowing to £58bn this year, as forecast by his budget watchdog in March. |
| Hammond is also under pressure to boost wages for millions of public-sector workers and spend more on health and education after the Tories’ catastrophic election performance highlighted the frustration of voters after seven years of austerity. | Hammond is also under pressure to boost wages for millions of public-sector workers and spend more on health and education after the Tories’ catastrophic election performance highlighted the frustration of voters after seven years of austerity. |
| Newsflash: Bank of America has chosen Dublin as its European Union hub, as it prepares for life after Brexit. | Newsflash: Bank of America has chosen Dublin as its European Union hub, as it prepares for life after Brexit. |
| The decision will allow BoA to continue operating in the EU, once the City of London loses its ‘passporting rights’. | The decision will allow BoA to continue operating in the EU, once the City of London loses its ‘passporting rights’. |
| Brian Moynihan, Chairman and CEO of Bank of America, said Dublin was the “natural” choice, as it currently houses more BoA employees than any other European City (apart from London, of course). | Brian Moynihan, Chairman and CEO of Bank of America, said Dublin was the “natural” choice, as it currently houses more BoA employees than any other European City (apart from London, of course). |
| And with no clarity on Britain’s final Brexit deal, BoA is pressing on with its plans. | And with no clarity on Britain’s final Brexit deal, BoA is pressing on with its plans. |
| Moynihan says: | Moynihan says: |
| We already have a fully licenced and operational Irish-domiciled bank which, combined with Ireland’s strong commitment to business and economic growth, makes Dublin the natural location to consolidate our legal entities as we transition. | We already have a fully licenced and operational Irish-domiciled bank which, combined with Ireland’s strong commitment to business and economic growth, makes Dublin the natural location to consolidate our legal entities as we transition. |
| We will move roles not only to Dublin but to other EU locations, with the focus on how we can best support our clients in these markets. | We will move roles not only to Dublin but to other EU locations, with the focus on how we can best support our clients in these markets. |
| While we await further clarity around the Brexit negotiations, we are making all necessary preparations to serve our clients however those discussions conclude.” | While we await further clarity around the Brexit negotiations, we are making all necessary preparations to serve our clients however those discussions conclude.” |
| Ireland’s Taoiseach, Leo Varadkar, welcomed the announcement, calling it “a strong endorsement of Ireland’s attractiveness as a location for investment”. | Ireland’s Taoiseach, Leo Varadkar, welcomed the announcement, calling it “a strong endorsement of Ireland’s attractiveness as a location for investment”. |
| Bank of America already has 700 staff in Dublin, and has been based in Ireland for almost 50 years. Earlier this week it contributed €880,000 to a music education program, following a €700,000 contribution a few years ago. | Bank of America already has 700 staff in Dublin, and has been based in Ireland for almost 50 years. Earlier this week it contributed €880,000 to a music education program, following a €700,000 contribution a few years ago. |
| This chart shows how the repayments on Britain’s national debt has risen in line with inflation, as measured by the retail price index. | This chart shows how the repayments on Britain’s national debt has risen in line with inflation, as measured by the retail price index. |
| UK public finances suffer inflation hit, adding to Hammond's headache https://t.co/B0io2cZgrN pic.twitter.com/bcag8Oxbtj | UK public finances suffer inflation hit, adding to Hammond's headache https://t.co/B0io2cZgrN pic.twitter.com/bcag8Oxbtj |
| (Not all UK debt is index-linked of course - some is sold with a fixed coupon that doesn’t move in line with inflation) | (Not all UK debt is index-linked of course - some is sold with a fixed coupon that doesn’t move in line with inflation) |
| Liberal Democrat leader Vince Cable blames last year’s Brexit vote, and the resulting tumble in the pound, for the rising deficit. | Liberal Democrat leader Vince Cable blames last year’s Brexit vote, and the resulting tumble in the pound, for the rising deficit. |
| Cable (who was appointed leader yesterday) argues that those who voted to leave the European Union to free up more money for healthcare have been misled. | Cable (who was appointed leader yesterday) argues that those who voted to leave the European Union to free up more money for healthcare have been misled. |
| “This rise in borrowing is a direct consequence of the dramatic fall in the pound since last year’s Brexit vote. | “This rise in borrowing is a direct consequence of the dramatic fall in the pound since last year’s Brexit vote. |
| “Instead of the £350m for the NHS that was promised, people’s living standards are falling and borrowing is going up. | “Instead of the £350m for the NHS that was promised, people’s living standards are falling and borrowing is going up. |
| “It shows why we need to offer people an exit from Brexit. | “It shows why we need to offer people an exit from Brexit. |
| “Nobody voted last year to become poorer or to increase the amount of their taxes spent on paying down the national debt.” | “Nobody voted last year to become poorer or to increase the amount of their taxes spent on paying down the national debt.” |
| Britain’s fiscal watchdog, the Office for Budget Responsibility, has issued a commentary on today’s public finances. | Britain’s fiscal watchdog, the Office for Budget Responsibility, has issued a commentary on today’s public finances. |
| It says Britain’s borrowing was forced up by higher debt costs on bonds linked to inflation, delayed payments to the European Union, and changes to the way self-assessment taxes are collected. | It says Britain’s borrowing was forced up by higher debt costs on bonds linked to inflation, delayed payments to the European Union, and changes to the way self-assessment taxes are collected. |
| Here’s the details: | Here’s the details: |
| Higher debt interest spending, primarily as higher RPI inflation raises accrued interest on index-linked gilts. Debt interest spending is up 24.3 per cent on a year earlier in the first three months of 2017-18, compared with our full-year forecast of 15.3 per cent. | Higher debt interest spending, primarily as higher RPI inflation raises accrued interest on index-linked gilts. Debt interest spending is up 24.3 per cent on a year earlier in the first three months of 2017-18, compared with our full-year forecast of 15.3 per cent. |
| Changes to the timing of expenditure transfers to EU institutions within calendar year 2017, which move spending from the end of 2016-17 into 2017-18. Transfers are up by 78 per cent in the first three months of 2017-18 from a year ago, having been down more than 40 per cent in the final two months of 2016-17. This timing effect explains most of the year-to-date increase, while around a fifth of it is attributable to an additional £0.3 billion payment in relation to historical adjustments to the calculations of VAT- and GNI-based contributions. | Changes to the timing of expenditure transfers to EU institutions within calendar year 2017, which move spending from the end of 2016-17 into 2017-18. Transfers are up by 78 per cent in the first three months of 2017-18 from a year ago, having been down more than 40 per cent in the final two months of 2016-17. This timing effect explains most of the year-to-date increase, while around a fifth of it is attributable to an additional £0.3 billion payment in relation to historical adjustments to the calculations of VAT- and GNI-based contributions. |
| Self-assessment (SA) receipts will be depressed in 2017-18 by the unwinding of the income shifting ahead of the April 2016 dividend tax rise. We expect receipts to fall £3.9 billion on a year earlier, but unlike the two spending factors, which are already evident in the data, this will only affect the public finances in early 2018 when self-assessment payments are due. | Self-assessment (SA) receipts will be depressed in 2017-18 by the unwinding of the income shifting ahead of the April 2016 dividend tax rise. We expect receipts to fall £3.9 billion on a year earlier, but unlike the two spending factors, which are already evident in the data, this will only affect the public finances in early 2018 when self-assessment payments are due. |
| Spending pushes deficit higher - read the latest commentary at https://t.co/k0nGloBMMW pic.twitter.com/6UpU6raBtG | Spending pushes deficit higher - read the latest commentary at https://t.co/k0nGloBMMW pic.twitter.com/6UpU6raBtG |
| The big picture from today’s public finances is that the national debt kept rising over the last year, and is heading towards £1.8 trillion. | The big picture from today’s public finances is that the national debt kept rising over the last year, and is heading towards £1.8 trillion. |
| The ONS says: | The ONS says: |
| Public sector net debt (excluding public sector banks) was £1,753.5 billion at the end of June 2017, equivalent to 87.4% of gross domestic product (GDP), an increase of £128.5 billion (or 3.6 percentage points as a ratio of GDP) on June 2016. | Public sector net debt (excluding public sector banks) was £1,753.5 billion at the end of June 2017, equivalent to 87.4% of gross domestic product (GDP), an increase of £128.5 billion (or 3.6 percentage points as a ratio of GDP) on June 2016. |
| It’s more useful to look at national debt in terms of the size of an economy, rather than as a raw figure. | It’s more useful to look at national debt in terms of the size of an economy, rather than as a raw figure. |
| So in GDP terms, Britain’s debt pile is now its largest since the 1960s, when it was paying down the cost of the second world war: | So in GDP terms, Britain’s debt pile is now its largest since the 1960s, when it was paying down the cost of the second world war: |
| Here’s my colleague Phillip Inman’s take on today’s public finances: | Here’s my colleague Phillip Inman’s take on today’s public finances: |
| The UK borrowed more than expected in June, with the country’s budget deficit rising to £6.9bn - almost 50% higher than the same month last year. | The UK borrowed more than expected in June, with the country’s budget deficit rising to £6.9bn - almost 50% higher than the same month last year. |
| Higher inflation forced the government to spend more on financing its debt mountain, other factors included lower GDP growth in the first quarter, a fall in corporation tax receipts and a bigger than expected contribution to the EU budget in June . Analysts said the deficit could now exceed forecasts over the rest of the financial year. | Higher inflation forced the government to spend more on financing its debt mountain, other factors included lower GDP growth in the first quarter, a fall in corporation tax receipts and a bigger than expected contribution to the EU budget in June . Analysts said the deficit could now exceed forecasts over the rest of the financial year. |
| The Treasury said the persistent shortfall in the government’s income compared with spending illustrated the need for a “credible fiscal plan” and that allowed ministers to support “sound public finances” while “promoting a stronger economy”. | The Treasury said the persistent shortfall in the government’s income compared with spending illustrated the need for a “credible fiscal plan” and that allowed ministers to support “sound public finances” while “promoting a stronger economy”. |
| But opposition parties were quick to say that the higher deficit showed austerity had failed and delivered weaker public services without strengthening the public finances or the economy...... | But opposition parties were quick to say that the higher deficit showed austerity had failed and delivered weaker public services without strengthening the public finances or the economy...... |
| More here: | More here: |
| Here’s some more details on the public finances, via the Press Association: | Here’s some more details on the public finances, via the Press Association: |
| The ONS said Government spending rose by 8.3% to £59.9bn in June compared with last year, while tax receipts lifted by 4.6% to £54.3bn. | The ONS said Government spending rose by 8.3% to £59.9bn in June compared with last year, while tax receipts lifted by 4.6% to £54.3bn. |
| The Treasury saw VAT climb by £400m to £11.4bn over the period, as income tax takings also stepped up by £800m to $12.7 billion. | The Treasury saw VAT climb by £400m to £11.4bn over the period, as income tax takings also stepped up by £800m to $12.7 billion. |
| However, corporation tax dropped by £200m to £4.8bn last month. | However, corporation tax dropped by £200m to £4.8bn last month. |
| Labour’s shadow chancellor John McDonnell has laid into the government over today’s public finances. | Labour’s shadow chancellor John McDonnell has laid into the government over today’s public finances. |
| McDonnell argues that chancellor Hammond should raise taxes on large corporations and the rich, to help fund a pay rise for public sector workers. | McDonnell argues that chancellor Hammond should raise taxes on large corporations and the rich, to help fund a pay rise for public sector workers. |
| He says: | He says: |
| “These figures reveal the continued failure of Philip Hammond and the Conservatives. | “These figures reveal the continued failure of Philip Hammond and the Conservatives. |
| “Seven years of Tory cuts have left our economy weaker, with falling wages, yet the deficit has not been eliminated two years after they claimed it would be, and the national debt continues to rise. | “Seven years of Tory cuts have left our economy weaker, with falling wages, yet the deficit has not been eliminated two years after they claimed it would be, and the national debt continues to rise. |
| “The Chancellor should stop handing out massive tax giveaways to big businesses and the super-rich, and instead give our hard-pressed public sector workers a pay rise, so we can end the travesty in our country of nurses having to rely on food banks. | “The Chancellor should stop handing out massive tax giveaways to big businesses and the super-rich, and instead give our hard-pressed public sector workers a pay rise, so we can end the travesty in our country of nurses having to rely on food banks. |
| “Only a Labour government will set out a serious plan for the public finances, with strategic investment underpinned by our fiscal credibility rule, to help build the high wage, high skill economy of the future for the many, not the few.” | “Only a Labour government will set out a serious plan for the public finances, with strategic investment underpinned by our fiscal credibility rule, to help build the high wage, high skill economy of the future for the many, not the few.” |
| The rise in borrowing in June means chancellor Philip Hammond has less wriggle room for tax cuts or spending rises in his next budget. | The rise in borrowing in June means chancellor Philip Hammond has less wriggle room for tax cuts or spending rises in his next budget. |
| Howard Archer of EY Item Club says: | Howard Archer of EY Item Club says: |
| “June’s shortfall highlights the fact that the public finances are still far from healthy. | “June’s shortfall highlights the fact that the public finances are still far from healthy. |
| At the same time rising public dissatisfaction with austerity and the public sector pay cap is exerting pressure on the government to recalibrate fiscal policy in November’s Budget. | At the same time rising public dissatisfaction with austerity and the public sector pay cap is exerting pressure on the government to recalibrate fiscal policy in November’s Budget. |
| However it currently looks more likely that there will be limited adjustments, rather than radical changes, to the fiscal approach.” | However it currently looks more likely that there will be limited adjustments, rather than radical changes, to the fiscal approach.” |
| Bad news for Chancellor as #UK #public #finances see clear y/y deterioration in June; PSNBex comes in at £6.9bn vs £4.8bn in June 2016. | Bad news for Chancellor as #UK #public #finances see clear y/y deterioration in June; PSNBex comes in at £6.9bn vs £4.8bn in June 2016. |
| The jump in Britain’s borrowing last month shows that the public finances have deteriorated, according to John Hawksworth, PwC chief economist. | The jump in Britain’s borrowing last month shows that the public finances have deteriorated, according to John Hawksworth, PwC chief economist. |
| But he’s hopeful that Britain could still hit its deficit targets, as last year’s borrowings have been revised down. | But he’s hopeful that Britain could still hit its deficit targets, as last year’s borrowings have been revised down. |
| Hawksworth says: | Hawksworth says: |
| “June saw a modest deterioration in public finances, with borrowing around £2 billion higher than a year earlier. This followed two months in which the deficit was almost identical to the year before. The general pattern is consistent with the OBR’s March forecast that we might see some increase in the budget deficit this financial year, as the economy slows and some one-off favourable factors from last year unwind. | “June saw a modest deterioration in public finances, with borrowing around £2 billion higher than a year earlier. This followed two months in which the deficit was almost identical to the year before. The general pattern is consistent with the OBR’s March forecast that we might see some increase in the budget deficit this financial year, as the economy slows and some one-off favourable factors from last year unwind. |
| “Nonetheless, the deficit may still come in below the OBR’s £58 billion forecast for 2017/18, given that the deficit in 2016/17 is now estimated to be £5.5 billion less than the OBR projected in March. So the increases in borrowing we are now seeing are from a lower base. | “Nonetheless, the deficit may still come in below the OBR’s £58 billion forecast for 2017/18, given that the deficit in 2016/17 is now estimated to be £5.5 billion less than the OBR projected in March. So the increases in borrowing we are now seeing are from a lower base. |
| Sam Tombs of Pantheon Economics fears that the public finances show that UK growth was weak in the last three months (leading to less tax being taken). | Sam Tombs of Pantheon Economics fears that the public finances show that UK growth was weak in the last three months (leading to less tax being taken). |
| June's UK public finances show growth in tax receipts has remained below 2016's rate, consistent with GDP growth having remained weak in Q2: pic.twitter.com/jrQLQm6Tty | June's UK public finances show growth in tax receipts has remained below 2016's rate, consistent with GDP growth having remained weak in Q2: pic.twitter.com/jrQLQm6Tty |
| Guardian Business has launched a daily email. | Guardian Business has launched a daily email. |
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| Today’s public finances also show that corporation tax receipts fell by £200m in June (year-on-year), helping to push the deficit up. | Today’s public finances also show that corporation tax receipts fell by £200m in June (year-on-year), helping to push the deficit up. |
| VAT, income tax and stamp duty receipts rose, though: | VAT, income tax and stamp duty receipts rose, though: |
| The UK government has responded to the public finances, by admitting that Britain’s national debt is too high. | The UK government has responded to the public finances, by admitting that Britain’s national debt is too high. |
| A Treasury spokesman says: | A Treasury spokesman says: |
| ‘Today’s release shows that our national debt, at £65,000 for every household, is still too high and leaves us vulnerable to any future shocks. | ‘Today’s release shows that our national debt, at £65,000 for every household, is still too high and leaves us vulnerable to any future shocks. |
| That is why we have a credible fiscal plan to get debt falling and deliver the sound public finances needed for a stronger economy and higher living standards.” | That is why we have a credible fiscal plan to get debt falling and deliver the sound public finances needed for a stronger economy and higher living standards.” |
| The government’s current plan is to eliminate the deficit by midway through the next decade (around 10 years later than former chancellor George Osborne once promised....) | The government’s current plan is to eliminate the deficit by midway through the next decade (around 10 years later than former chancellor George Osborne once promised....) |
| Digging into today’s disappointing public finances, you can see that the spike in inflation has pushed Britain’s borrowing up. | Digging into today’s disappointing public finances, you can see that the spike in inflation has pushed Britain’s borrowing up. |
| That’s because the UK has issued index-linked bonds, whose interest payments are linked to the retail prices index. | That’s because the UK has issued index-linked bonds, whose interest payments are linked to the retail prices index. |
| RPI was 3.5% in June, up from 1.6% a year ago, which has driven up the cost of servicing Britain’s national debt. | RPI was 3.5% in June, up from 1.6% a year ago, which has driven up the cost of servicing Britain’s national debt. |
| As this chart shows, Britain’s interest payments jumped by £1.2bn in June, from £3.7bn to £4.9bn. | As this chart shows, Britain’s interest payments jumped by £1.2bn in June, from £3.7bn to £4.9bn. |
| This chart also shows that Britain’s payments to the EU jumped by £700m in June. | This chart also shows that Britain’s payments to the EU jumped by £700m in June. |
| The ONS says: | The ONS says: |
| In June 2017, the UK paid £1,249 million to the EU budget through GNI and VAT based contributions, which are made net of the UK rebate. This payment consisted of our standard monthly VAT and GNI based contribution of £991 million, along with a £258 million payment adjustment covering earlier years, which will be subject to a further UK rebate. | In June 2017, the UK paid £1,249 million to the EU budget through GNI and VAT based contributions, which are made net of the UK rebate. This payment consisted of our standard monthly VAT and GNI based contribution of £991 million, along with a £258 million payment adjustment covering earlier years, which will be subject to a further UK rebate. |
| The higher UK fiscal deficit in June was due to higher debt interest ( RPI based) and a higher EU contribution #BoE #GDP | The higher UK fiscal deficit in June was due to higher debt interest ( RPI based) and a higher EU contribution #BoE #GDP |
| The public finances report also shows that Britain is on track to borrow more this financial year than in 2016-17. | The public finances report also shows that Britain is on track to borrow more this financial year than in 2016-17. |
| As you can see, borrowing is already up compared with a year earlier: | As you can see, borrowing is already up compared with a year earlier: |