UK Fails to Reach Deficit Reduction Targets

Corporation tax receipts slumped by almost 10% in October, which normally sees a heavy inflow, mainly due to a sharp drop in oil and gas receipts after lower-than-expected production. The VAT take was also down, while central government spending rose by £4.2bn, partly due to a change in timing of grants to local authorities.

This meant public sector net borrowing excluding the effects of banking bailouts came in at £8.6bn in October, compared with £5.9bn a year ago. City economists had expected a shortfall of £6bn.

Chris Williamson, chief economist at Markit, said the main problem the government is facing is the anaemic pace of economic growth. The Office for Budget Responsibility (OBR) was expecting the economy to grow by 0.8% in 2012, and expand by 2% in 2013. “Zero growth now looks a more likely outcome for this year, and a return to robust growth next year is starting to look overly optimistic,” he said.

A Treasury spokesman said: “The economy is healing, but it still faces many challenges. These numbers illustrate that, but also show the government’s plans to bring spending under control are on track for the year.” He added that payroll taxes and national insurance payments were holding up well.

via The Guardian

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