George Osborne's borrowing blow despite record stamp duty

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Record stamp duty takings have failed to save Chancellor George Osborne from more disappointment on borrowing, putting his efforts to lop £20 billion off the nation’s borrowing bill this year under immediate pressure.

The deficit for the first month of the new financial year was £600 million higher than expected at £7.2 billion, and just £300 million lower than April 2015. 

The poor borrowing performance comes despite the biggest stamp duty take on land and property on record, in part boosted by the Chancellor’s new 3% surcharge on second-home and buy-to-let purchases. 

The stamp duty tax take soared 46%, or £400 million, to £1.3 billion over the month.

There was also bad news for the Chancellor in the Office for National Statistics’ latest assessment of borrowing in the last financial year at £76 billion. 

The figures may yet be revised but the borrowing bill is £3.8 billion more than the £72.2 billion pencilled in by the Office for Budget Responsibility.

The higher borrowing was put down to higher capital spending as well as increased pension payments by the ONS. 

This year Osborne is attempting to cut the deficit to £55.5 billion, and targeting an overall surplus of  £10 billion by 2019/20.

But prospects have been hampered by the unexpectedly weak growth seen at the start of this year, as well as the creeping impact of a Brexit-inspired slowdown on the Treasury’s tax take ahead of next month’s vote.

Alan Clarke of ScotiaBank said: “Admittedly, it is month one out of 12 and anything can happen over the rest of the year.” 

“Nonetheless, logic would say that the poor start to the year for growth argues for worse, not better public finances.”

Howard Archer of IHS Global Insight added: “The more the economy slows amid heightened uncertainty ahead of the referendum, the more challenging the fiscal target will become. 

“The Chancellor will certainly need growth to pick up once the referendum is out of the way, assuming that there is a vote to remain in the EU.”

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May 24, 2016 |
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