Feb public finances hint at undershoot of forecast

 

Britain's public borrowing hit its highest on record for a February but rose less than economists expected, suggesting the government may undershoot its borrowing forecasts for the tax year ending in March.

This would be welcome news for Chancellor Alistair Darling as he grapples with a record budget deficit and prepares his annual budget for March 24 ahead of an election widely expected to be held on May 6.

The Office for National Statistics said that public sector net borrowing in February was 12.361 billion pounds, below economists' forecast of 14.75 billion but well above the 8.766 billion pounds of February 2009.

The cumulative figure for the tax year to date rose to 131.867 billion pounds, suggesting that the government may undershoot its forecast borrowing for the year to April 2010, which was 170.4 billion including financial interventions.

The Treasury played down chances of a big undershoot.

March is traditionally a heavy borrowing month because spending tends to be higher than average and tax receipts lower. In 2009 borrowing rose to 20.0 billion pounds in March from 8.8 billion in February.

"With one month of the financial year remaining, today's figures are broadly in line with our Pre-Budget Report forecasts" said a Treasury spokesman.

Nonetheless, full-year borrowing looks likely to come in below Darling's forecasts, a boost for the government which has been criticised by the opposition Conservatives for letting public finances get out of control and damaging investor confidence.

Sterling rose on the news and gilt futures gained modestly. 

"This perhaps gives Darling some room to offer something to the electorate at the March 24 budget. However with ratings agencies and financial markets eager to see action on the deficit he is unlikely to offer very much" said James Knightley, economist at ING.

January's PSNB figure was revised sharply downwards to just 43 million pounds from 4.339 billion pounds. The ONS said revisions to back data for the year had reduced overall borrowing for 2009/10 by 2.9 billion pounds.

The cash measure of borrowing came in at 7.703 billion pounds, again below forecasts for a reading of 11.0 billion but well above the 4.681 billion in February 2009.

Darling has pledged to halve its budget deficit over the next four years.

Debt as a percentage of gross domestic product was 60.3 percent in February, the second highest since records began in the 1974/75 tax year.