2017.07.2108:17:00UTC+00UK Budget Deficit Widens More Than Forecast

The UK budget deficit widened more-than-expected in June as debt interest increased notably after inflation lifted the cost of index-linked bonds.

Public sector net borrowing, excluding interventions, increased by GBP 2.0 billion from a year ago to GBP 6.9 billion in June, data from the Office for National Statistics showed Friday. The expected figure was GBP 4.9 billion.

Public sector finances have started to deteriorate a little, limiting the scope for an easing in austerity and mean that fiscal policy will still provide a significant drag on GDP growth over the next few years, Scott Bowman, an economist at Capital Economics, said.

Income tax and capital gains tax grew 7.1 percent to GBP 12.7 billion, while interest payments surged 32.9 percent due to higher inflation.

In the current financial year-to-date, PSNB climbed by GBP 1.9 billion to GBP 22.8 billion.

Of this GBP 22.8 billion of PSNB, GBP 17.1 billion related to the cost of the "day-to-day" activities of the public sector, while GBP 5.7 billion related to capital spending such as infrastructure.

Central government net cash requirement decreased by GBP 15.5 billion to GBP 11.5 billion during the three months ended June.

Public sector net debt totaled GBP 1,753.5 billion at the end of June, equivalent to 87.4 percent of gross domestic product, data showed.