Better borrowing gives government hope on budget goal

LONDON (Reuters) - Britain's public finances deteriorated much less than feared during the first six months of the current tax year, giving Chancellor George Osborne some hope of meeting his budget goal even as the economy remains weak.

The key measure of public sector net borrowing used in official forecasts was 2.6 billion pounds higher than a year earlier for the April-September period, compared to an overshoot of 10.6 billion pounds previously estimated for April-August, the Office for National Statistics said.

"This is much, much better than they would have thought only a month ago," said Brian Hilliard, economist at Societe Generale. "It's still an overshoot compared to the plans but it does make their life a bit easier."

Until the release of September's data, the government had looked on track for a big overshoot of its 2012/13 goal to reduce public sector net borrowing to 120 billion pounds, as tax revenues in a recession-hit economy had failed to keep pace with government spending.

Public sector net borrowing, excluding the transfer of Royal Mail pension assets, stands at 65.1 billion pounds for the first six months of the tax year, compared to 62.4 billion pounds at the same point in 2011.

Economists expect the next six months to be more supportive for the public finances, as the economy is forecast to leave recession.

September's data - which incorporated big revisions to the April-August period - showed that government spending had risen by just 2.1 percent, compared to provisions for a 3 percent rise for the year as a whole.

Borrowing data for September alone was also better than markets had expected.

Public sector net borrowing excluding financial sector interventions - the government's preferred measure - fell to 12.809 billion pounds from 13.501 billion in September 2011, its lowest September reading since 2008, the ONS said.

This was below economists' average forecast in a Reuters poll for 13.5 billion pounds.

Eliminating Britain's structural budget deficit lies at the heart of the political programme of the coalition of Conservatives and Liberal Democrats, but an initial aim of achieving this by the next election in 2015 has receded to 2017.

The opposition Labour Party has urged a slower pace of deficit reduction, arguing that Osborne's approach is self-defeating because it acts as a disproportionate drag on growth.

Osborne will announce the new budget forecasts on December 5, and the International Monetary Fund and many other economists expect the forecasts to show he is likely to miss a secondary goal of putting public sector net debt as a share of national income on a downward path by 2015.

Net debt totalled 1.065 trillion pounds - or 67.9 percent of GDP - in September, up from 63.6 percent of GDP a year earlier.

(Reporting by David Milliken)

Source: http://news.yahoo.com/september-public-borrowing-falls-more-expected-083505648--business.html

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