Slight fall in UK borrowing gives relief to Osborne

Tue Apr 23, 2013 5:30am EDT
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By David Milliken and Christina Fincher

LONDON (Reuters) - Britain's budget deficit fell slightly last year, official data showed on Tuesday, saving the country's embattled finance minister some embarrassment as criticism of his austerity program mounts.

The Office for National Statistics said public borrowing, excluding some effects of bank bailouts and a one-off Royal Mail pension transfer, was 114.2 billion pounds in the 2012-13 tax year, equivalent to 7.37 percent of national output.

This was down from 120.9 billion pounds or 7.93 percent of output in 2011/12, and in line with the forecast last month by Britain's budget watchdog, the Office for Budget Responsibility.

A tougher measure of borrowing - which in addition strips out cash transfers from the Bank of England allowed under European Union statistical rules - also fell marginally on the year.

Nonetheless, Britain's budget deficit is still one of the highest among major advanced economies as the country struggles to deal with the legacy of the financial crisis.

"The Chancellor just made it in under the OBR's forecast, albeit by the skin of his teeth," said Victoria Clarke, an economist at Investec.

"The bigger test will be if he can continue to meet the forecasts for the years ahead, and we think it's looking vulnerable because of the weakness of the euro area, which could decrease tax revenues and mean higher spending pressures."

The government welcomed the data as a sign that its policies were working. "Though it is taking time, the government is fixing this country's economic problems," the Treasury said in a statement, citing a one-third reduction in the budget deficit since 2010 and the creation of a million-and-a-quarter new private sector jobs.   Continued...

George Osborne, Chancellor of the Exchequer, attends the funeral service of former British prime minister Margaret Thatcher at St Paul's Cathedral in London April 17, 2013. REUTERS/Christopher Furlong/Pool