Stay 
Trading Conditions
Products
Tools
The level of U.K. public sector borrowing in July fell more than expected, figures showed on Thursday.
The Office for National Statistics said net borrowing last month totaled GBP 3.2 billion. This is considerably smaller than the GBP 13.9 billion borrowed in June, and also lesser than the expected net borrowing level of GBP 4.8 billion. Excluding financial interventions, net borrowing was GBP 3.8 billion. This was GBP 2.3 billion lower than in July 2009, when net borrowing was GBP 6.1 billion
The ONS also said total government debt was now equivalent to 63.7% of the U.K.'s one-year economic output. This compares to a debt to GDP ratio of 57.3% the same time a year ago. Public sector net debt, excluding interventions, at the end of July was GBP 816.2 billion, equivalent to 56.1% of GDP.
"Should borrowing continue along the same path, it would undershoot the Office for Budget Responsibility's full-year forecast of GBP 149 billion by around GBP 3 billion," said Vicky Redwood, senior U.K. economist at Capital Economics. "But this still leaves borrowing at extremely high levels and does not reduce the need for a massive fiscal tightening over the coming years."
The public sector net cash requirement showed a surplus of GBP 4.1 billion in July. This compared to a deficit of GBP 0.9 billion in the same month a year ago.
The public sector budget, excluding financial interventions, was in deficit by GBP 0.5 billion. This is GBP 3.3 billion lower than the deficit recorded in July 2009. Including interventions, the budget was in surplus by GBP 0.1 billion.
The numbers will come as a boost to Chancellor George Osborne, as he strives to slash Britain's highest post-war budget deficit. The U.K. had a deficit of around 11% of GDP last year, which the Conservative - Liberal Democrat coalition aims to completely overturn in another five years.
Osborne, who completed a hundred days in office this week, said on Tuesday that postponing the strict budget cuts "is the surest way to disaster." "There are some political opponents who claim that in setting out our decisive plans to deal with the deficit we have taken a gamble with Britain's economy," he said. "In fact the reverse is true."
"The gamble would have been not to act, to put Britain's reputation at risk, and to leave the stability of the economy to the vagaries of the bond market, assuming investors around the world would continue to tolerate the largest budget deficit in the G20," the Chancellor said.
Separately, the ONS said retail sales in the U.K. grew 1.1% in July from June - nearly four times higher than expectations. This marked the third straight rise in sales and the fastest pace of growth in five months. However, observers said the figures may have been skewed to some extent due to the soccer World Cup.
Copyright(c) 2010 News.com, Inc. All Rights Reserved
