Osborne Budget Forecast in Jeopardy After Disappointing February

  • Osborne needs smallest March deficit since 2004 to meet goal
  • OBR had not seen latest data when it issued March 16 forecasts

Britain posted a larger-than-predicted budget deficit in February, leaving Chancellor of the Exchequer George Osborne little room to meet his full-year fiscal forecast.

Government spending exceeded revenue by 7.1 billion pounds ($10.1 billion) compared with 7.5 billion pounds a year earlier, figures from the Office for National Statistics show. Economists in a Bloomberg survey had predicted a 5.9 billion-pound shortfall.

In the first 11 months of the fiscal year, the deficit was 70.7 billion pounds. It means the shortfall for the final month needs to come in at 1.5 billion pounds or less to meet the 72.2 billion pounds forecast by the Office for Budget Responsibility last week. March last saw a deficit that small in 2004.

The OBR had not seen the latest figures when it issued its new projections on March 16, the ONS said. The watchdog trimmed its forecast for 2015-16 but added 36.4 billion pounds to the deficit for the next three years because of a worsening economic outlook.

The main figures show:

  • Government revenue rose 5.4 percent in February and spending fell 1.6 percent.
  • Final payments of self-assessed income tax receipts spilled over into February. In January and February together, self-assessment rose by 400 million pounds to a record 15.5 billion pounds.
  • Central government net cash requirement totaled 59.8 billion pounds in first 11 months of 2015-16. Full-year shortfall estimated at 75.5 billion pounds.
  • In February, receipts rose across the board, with value-added tax increasing 3.2 percent, income tax and capital gains climbing 6.5 percent and corporation tax up 11.5 percent. Stamp duty on property purchases jumped 24 percent and self-assessment was up 11 percent.
  • Central-government spending driven down by a 26 percent decline in transfers to local government. Other costs increased.
  • Net investment rises to 4.5 billion pounds from 4.1 billion pounds year earlier. The deficit on current budget narrows to 2.6 billion pounds from 3.4 billion pounds.
  • January budget surplus revised to 13.8 billion pounds from 11.2 billion pounds. Upward revisions to receipts and downward revisions to spending.
  • February net debt was 83.1 percent of gross domestic product compared with 82.9 percent a year earlier.
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