U.K. Budget Deficit Narrows as Sales Taxes, Stamp Duty Increase
Britain’s budget deficit narrowed in October from a year earlier as accelerating economic growth boosted sales taxes and stamp duty on property purchases.
Net borrowing excluding temporary support for banks was 8.1 billion pounds ($13 billion) compared with 8.2 billion pounds a year earlier, the Office for National Statistics said in London. Tax receipts increased 3.2 percent, with value-added tax rising 6.4 percent and stamp duty soaring 46 percent. Spending increased 1.2 percent.
The figures pave the way for Chancellor of the Exchequer George Osborne to cut his borrowing projections next month, with a resurgent economy putting Britain on course for its smallest budget deficit in five years. That may allow the Treasury to scale back the amount of gilts it needs to sell to finance its spending.
The deficit in October compared with median forecast of 21 economists in a Bloomberg News survey for a figure of 7.5 billion pounds. The gifting of Royal Mail Plc shares to eligible employees last month added 331 million pounds to net borrowing, meaning underlying borrowing was about 7.8 billion pounds.
In the first seven months of the fiscal year, the deficit was 64.8 billion pounds compared with 70.6 billion pounds in the same period a year ago.
If the momentum is kept up, the 2013-14 shortfall could narrow to about 106 billion pounds, the least since 2008-09 and down from 115 billion pounds a year earlier. In March, the Office for Budget Responsibility predicted a deficit of 120 billion pounds, or 7.5 percent of gross domestic product.
Osborne will announce new forecasts from the OBR in his Autumn Statement on Dec. 5.
The public finances typically get a boost in October, when onshore companies and oil and gas firms pay installments of tax on their profits. Corporation-tax receipts fell 8.2 percent last month from a year earlier, the ONS said.
The sale of 2 billion pounds of Royal Mail Plc (RMG) shares by the government last month did not count toward net borrowing, though it reduced the cash measure of the deficit that determines how much debt the government needs to sell in financial markets. In October, the Treasury also received 4.1 billion pounds of coupon income from the Bank of England’s gilt holdings under its asset-purchase program.
Central government, which excludes state-owned banks, posted a cash surplus of 7.7 billion pounds last month, the largest for an October since 2006. The deficit in the year to date fell to 32 billion pounds from 54.8 billion pounds.
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