In the first piece of positive economic news for a while, public sector borrowing fell back in October.
The latest statistics from the Office for National Statistics (ONS) show that public sector net borrowing (PSNB) stood at £6.5 billion in October 2011, around £1.2 billion lower than in October 2010, and just below market expectations of £6.6 billion.
Meanwhile, revenue through taxes increased by 4.1 per cent year on year, largely down to January’s increase in VAT to 20 per cent – in total, VAT receipts were up 25 per cent year on year.
One area for concern raised by the Office for Budget Responsibility (OBR), which is due to give an update next week, was revenue from corporation tax. According to the OBR, October is an important month for corporation tax, but they were down 6.9 per cent year on year.
The OBR said that much of this reduction was due to the financial sector, reflected in bank profit announcements due to weaker investment banking activity, writedowns on euro area sovereign debt and provisions for the mis-selling of payment protection insurance.
The OBR will report on the economic and fiscal outlook alongside the Autumn Statement on 29 November, but stunted growth is likely to have impacted on this. Consequently, growth is predicted to be the focus of the announcement, and business groups are putting forward their recommendations ahead of next week.
Commenting, David Kern, chief economist at the British Chamber of Commerce (BCC), said: “Given the difficult economic situation, we believe that the fiscal strategy is on course and the government is right to continue to seek to reduce our structural deficit. But with problems facing the eurozone and recent rises in UK unemployment, it is even more important to reallocate priorities within the overall fiscal plan to help businesses create jobs, export and invest. Given the flexibility within the deficit-cutting plan, we would urge the government to announce new measures to support businesses in next week’s Autumn Statement. We are also hoping to see the introduction of a comprehensive credit-easing programme to increase the availability of lending to small businesses, and would expect the MPC to support such a scheme.”
