MNI DATA IMPACT: UK Borrowing Exceeds OBR F'cast, Worse Ahead

By Laurie Laird

     LONDON (MNI) - UK public sector borrowing rose sharply in the 2019/20

fiscal year, topping the Office for Budget Responsibility's target, but

statisticians at the Office for National Statistics warn that the economic shock

caused by the Covid-19 virus could lead to heavy revisions in months to come.

     The following are the main points from the March public borrowing report

released on Thursday by the ONS.

     - Borrowing rose by 23.7% to GBP48.7 billion in the latest financial year,

exceeding the target of GBP47.4 billion set by the Office for Budget

Responsibility in March. That took borrowing to 71.9% of GDP, down from 72.3% at

the end of 2018/19.

     - However, 2019/20 borrowing data are subject to heavy Covid-related

revisions, according to the ONS, even though lock-down orders and business

closures came in the closing weeks of the financial year. PAYE, VAT and

corporate tax receipts included in the March release are partially based on

estimates, and the ONS has yet to adjust those categories for the impact of the

virus.

     - VAT receipts barely increased in March, taking VAT to GBP154.5 billion in

the financial year, up 2.0% over 2018/19, the smallest increase since the depths

of the financial crisis in 2009/10. VAT receipts for the financial year just

ended assumed that payments deferred under government schemes will be submitted

at a later date, but a national statistician admitted that businesses taking the

VAT holiday could eventually fail, compromising the estimates underlying VAT

calculations included in Thursday's release.

     - Corporate tax receipts slipped by 2.2% to GBP56.6 billion in the latest

fiscal year, the biggest fall since 2011/12. The decline could be revised

downward in later iterations of public borrowing estimates, according to ONS

officials.

     - Government outlays aside from interest and social payments surged by

13.3% in March over the same month a year earlier, the largest increase on

record, inflated by a GBP4.2 billion disbursement to local governments related

to Covid-19. In the same category, government spending on goods and services

increased by 4.3% in the year to March, while staff costs, including NHS

workers, increased by 8.4%.

     - While the ONS highlighted the likely downward revisions to tax receipts,

officials also stressed that the OBR's forecast of public sector net debt, at

79.5% for 2019/20, is based on dated estimates of GDP, which are likely to be

revised sharply downward, raising later calculations of debt as a percentage of

GDP.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MABDS$,M$B$$$,M$E$$$]