Net borrowing was 13.3 billion pounds ($22.7 billion) compared with 12.6 billion pounds in May 2013, the Office for National Statistics said today. Excluding 900 million pounds paid by Switzerland last year, the deficit narrowed by 200 million pounds.
The report showed that U.K. tax receipts rose 1.1 percent in May compared with a year ago and spending increased 0.3 percent. When money from the tax on Swiss accounts held by Britons is excluded from the calculations, revenue rose 3.4 percent.
The deficit in May compares with a forecast of 12.2 billion pounds in a Bloomberg survey of economists. Net investment, such as spending on infrastructure, climbed to 1.5 billion pounds from 1 billion pounds. This was offset by a 700 million-pound narrowing in the current-budget shortfall, with central government accounting for all of the improvement.
The figures provide a further boost for Prime Minister David Cameron as he prepares to seek a second term in less than a year. Credit-rating company Standard & Poor’s raised its U.K. outlook last week amid a “robust and broadening recovery.”
An improving economy is helping Chancellor of the Exchequer George Osborne to cut a budget deficit that reached a record 11 percent of economic output when the Conservative-led coalition took office in 2010 in the aftermath of the financial crisis.
Borrowing fell to 6.6 percent of gross domestic product in the fiscal year through March and Osborne says more budget cutting is needed to balance the books, meaning austerity is set to continue well beyond the May 2015 general election. In the first two months of the current fiscal year, net borrowing was 24.2 billion pounds, 1 billion pounds higher than a year earlier when the Swiss tax effect is excluded.
Osborne is being further aided by a booming property market. Stamp duty on purchases of shares and homes amounted to 1.2 billion pounds in May, up 20 percent from a year earlier, with London homes accounting for the increase, the ONS said.
Of the main revenue categories, only income tax fell in May, declining 100 million pounds from a year earlier. Value-added tax rose 4.9 percent and revenue from company profits surged 13 percent. A a drop in welfare costs helped to offset a 2.3 percent increase in departmental spending.
The U.K. Treasury received no gilt-coupon income from the Bank of England last month, the ONS said. European Union accounting rules restrict the amount that can count against net borrowing in the 2014-15 fiscal year to 12.8 billion pounds. Cash measures of the public finances receive the full benefit.
The cash gauge the Treasury uses to calculate how much it needs to borrow in the financial markets showed a deficit of 12.4 billion pounds last month. The overall public sector including state-controlled banks recorded a shortfall of 8.5 billion pounds.
To contact the reporter on this story: Andrew Atkinson in London at firstname.lastname@example.org