The Institute of Fiscal Studies is warning Government borrowing will come in £13bn higher for 2012/13 than previously forecast if current trends continue.
Public sector borrowing reached £75.6bn between April and October – 10.8 per cent higher than the same period last year. If borrowing continues to grow at this rate over the remaining five months of the financial year, borrowing for 2012/13 will amount to £134bn.
Adjusting for trends in central government receipts and spending, the IFS has revised this estimate up to £135bn.
In March, the Office for Budget Responsibility forecast borrowing would total £126bn, or 8.3 per cent of GDP, this year.
IFS senior research economist Rowena Crawford says: “Today’s figures will likely result in an unpleasant feeling of deja vu for the chancellor as he prepares for next month’s Autumn Statement. As was the case last year, a worse-than-expected decline in corporation tax receipts in October has contributed to an overall picture of lower-than-expected growth in revenues so far this year. Spending on the administration of and delivery of public services has also again grown more slowly so far than forecast for the year as a whole.”
Chancellor George Osborne confirmed a 2 per cent cut to corporation tax in the March Budget. The tax rate fell from 26 per cent to 24 per cent and will be cut further, to 22 per cent, in 2014.
Cash receipts of corporation tax in October were 9.9 per cent lower than for the same time last year, while receipts were 9.8 per cent lower between April and October than for the same period in 2011.
The IFS forecast works on the assumption that central government departments fail to spend around £4bn of their budgets. Were they to fully utilise their budgets, borrowing would instead overshoot the OBR’s prediction by £17bn, according to the IFS.