By Jon Sindreu And Nick Winning
LONDON--The British public sector borrowed more than expected in
September, increasing the risk that the government will overshoot
its austerity targets.
According to figures released Tuesday by the Office for National
Statistics, public bodies in the U.K.--excluding public sector
banks--borrowed GBP11.8 billion ($19 billion), up from GBP10.3
billion in September 2013. This is above forecasts by economists
polled by The Wall Street Journal--who expected borrowing needs to
go down--and leaves the budget deficit at 4.2% of gross domestic
product.
Central government bears most of the responsibility in the
increase of the budget deficit: Compared with the same period in
the 2013-14 fiscal year, it has increased expenditure by 5.4%,
while receipts only rose by 3.1%.
Since the financial year started in April, the Treasury has
mainly struggled with low income-tax revenues. The reason is that
salaries in the U.K. remain stagnant: Average weekly earnings grew
by only 0.7% in the three months to August, official figures showed
last week, while annual headline inflation was more than double the
rate during the period.
As the British public debt is already above 125% of gross
domestic product the Treasury is counting on the strong economy to
boost tax receipts and curtail the budget deficit. This would allow
Chancellor of the Exchequer George Osborne to keep his pledge of
achieving a surplus by the 2018-19 financial year without further
significant cuts in spending. Low income-tax revenues, however,
threaten these plans.
For austerity to remain on track, the Office for Budget
Responsibility--the U.K.'s independent fiscal watchdog-estimates
total public borrowing would need to be GBP96 billion by March
2015. Half way into this period, borrowing is already 60% of that
figure.
Although Mr. Osborne still has time to narrow the shortfall, the
general election is right around the corner--May next year--and
both the budget deficit and the declining living standards are
major issues in the campaign.
Write to Jon Sindreu at jon.sindreu@wsj.com and Nick Winning at
nick.winning@wsj.com