Britain had its best start to a fiscal year since the financial crisis, handing a boost to Chancellor of the Exchequer George Osborne as he tries to eliminate the budget deficit.
Net borrowing excluding public-sector banks was 6.8 billion pounds ($10.7 billion) in April, 2.5 billion pounds lower than a year earlier and the smallest deficit for the month since 2008. Economists in a Bloomberg survey had forecast an 8.3 billion-pound shortfall. Government income rose 2.7 percent and spending dropped 7.4 percent.
The figures come as Osborne begins the task of finding 30 billion pounds of spending cuts by 2018 after his Conservative Party won a surprise parliamentary majority in the May 7 election. Chief Secretary to the Treasury Greg Hands has written to most government departments asking them to identify savings and report back by the July 8 budget. Details of where precisely the ax will fall will be set out in a spending review later this year.
“It would be very easy at the beginning of a second term to take our foot off the pedal,” Osborne said in a speech to business leaders this week. “That’s not what we’re going to do. I want Britain to find that extra gear.”
The pound was trading at $1.5660 as of 9:35 a.m., little changed on the day. The 10-year gilt yield was down 5 basis points at 1.93 percent.
Osborne is seeking 13 billion pounds of cuts to government departments and 12 billion pounds of welfare savings as he tries to turn a budget deficit of 4.8 percent of gross domestic product into a surplus by the 2018-19 fiscal year.
“Today’s figures show that our deficit-reduction plan is working,” the Treasury said in a statement. “We have more than halved the deficit, but at just under 5 percent it is still one of the highest in the developed world. There is no shortcut to fixing the public finances so we have to continue with the hard work of identifying savings and making reforms necessary to finish the job and build a resilient economy.”
In the year ended March, the deficit stood at 87.7 billion pounds, slightly above the 87.3 billion pounds reported last month. That will fall 75.3 billion pounds in the current fiscal year and the budget is projected to be in surplus by 7 billion pounds by 2020, the Office for Budget Responsibility estimates.
With the exception of stamp duty on property purchases, tax revenue rose across the board last month. Income tax climbed 3.7 percent on the year, corporation tax surged 11.3 percent and value-added tax on sales increased 3.4 percent to its highest April level on record.
Excluding transfers of gilt-coupon income from the Bank of England, government revenue rose 3.4 percent in April, the ONS said.
On the spending side, the Treasury is benefiting from zero inflation, which is reducing payments on index-linked gilts and some welfare costs. Interest costs fell 6.9 percent last month and net social benefits declined 1.1 percent. Net public-sector investment fell to 511 million pounds, the least for the month since 2007.
The measure used to calculate how much the Treasury needs to borrow in the financial markets showed a surplus of 1.2 billion pounds last month. Net debt was little changed at 1.49 trillion pounds, or 80.4 percent of GDP.