Government borrowing surges

The Government had to borrow much more money than the City expected last month to meet the shortfall between its spending and tax revenue. The public sector borrowing requirement totalled £3.5bn, compared with £2.9bn in November last year.

This ran contrary to the pattern in recent months, in which borrowing has been lower than the levels recorded last year. The cumulative deficit for the first eight months of the financial year was £22.7bn, down from £29.3bn in the same period of 1993/4. The PSBR has been falling as rapid economic growth has boosted tax revenue and cut spending on unemployment and other social security benefits.

November's PSBR was higher than expected because local authorities repaid £900m less debt than they did in the same month of 1993. Last year local authorities took advantage of a scheme in the 1992 Autumn Statement to encourage them to spend the proceedsof sales of council houses and other assets. The Treasury forecast in the Budget that the PSBR would total £34.4bn this year, with most City economists expecting a small undershoot.

Tax revenues were relatively buoyant, with corporation tax receipts more than 18 per cent up on November 1993, reflecting the typically rapid rebound in profits as economic recovery gets under way. But this is barely half the average rate of increase seen in the year so far. Income tax receipts are also running almost 10 per cent higher than last year, in line with the Treasury's Budget forecast. Revenues from VAT have been nearly 12 per cent higher in the financial year so far than they were in 1993/4.

In contrast, spending by government departments is barely higher than it was a year ago and running below Treasury predictions. But the flow of spending can be volatile as departments exhaust their budgets in the last months of the financial year.