Govt borrowing could be £7bn less than predicted

Public finance figures released this morning could mean the Government is on track to borrow £7bn less this financial year than than previously though, according to the Institute for Fiscal Studies.

The figures from the Office of National Statistics show public sector net borrowing for the first eleven months of 2010/11 was £123.5bn, 9.6 per cent lower than the same period in the previous year.

The IFS says if this trend continues, borrowing for the year will be about £141bn, £7.5bn less than the £148.5bn predicted by the Office of Budget Responsibility last November.

IFS research economist Rowena Crawford says: “Today’s figures suggest that if borrowing continues at the same rate in March as it has over the last 11 months, the Government would be on course to borrow £7bn less this financial year than was forecast.

“The potential lower total borrowing appears to be driven by local authorities and public corporations borrowing less so far this year to finance their day-to day expenditure, coupled with a larger than forecast cut in public sector net investment.”

Yesterday the Ernst & Young Item Club estimated public sector borrowing would end the year £8bn lower than expected due to strong tax receipts.

However the IFS warns that borrowing may not continue on the same trajectory and that it may end up higher than last year. Crawford suggests any improvement in the public finances be “banked”.

It was reported this morning that Chancellor George Osborne will be forced to admit at the Budget that the “wrong type of inflation” will lead to public borrowing to be higher than expected  from 2012 onwards.