-Government allowing automatic stabilisers to operate fully
-More cuts may have to be brought forward if economy continues weak
Net borrowing by the UK public sector, excluding the temporary effects of financial interventions (PSNB ex), reached 14.4bn pounds in June 2012; 0.5bn pounds higher than in June 2011, when net borrowing was 13.9bn pounds, according to the latest data from the Office for National Statistics (ONS).
The consensus estimate was for a fall to £13.4bn, from last month“s level of £18.42bn.
Total net borrowing was also higher than forecast
Borrowing by local governments decreased by £200m, but was compensated for by an identical increase in borrowing by non-financial public corporations.
Public sector banking groups“ borrowing on the other hand fell by -£2.4bn, so that total public sector net borrowing came in at £12.1bn.
The consensus estimate for total public sector net borrowing, however, had been for £11bn, following last month“s level of £16.05bn and £11.1bn a year ago.
As a percentage of annual gross domestic product (GDP) public sector net debt (including interventions) fell to 144.5% from 149% one year ago, while if excluded it rose to 66.1%, a record.
Nevertheless, the public sector“s net cash requirement came in at £3bn for June, well below the £8bn forecast.
More cuts may have to be brought forward
Commenting on today“s data economists at Barclays Research are saying that: "We think that the soft economic activity will be the major challenge to the government lowering borrowing this year. The fact that the main overshoot is coming from higher expenditure on social benefits (a highly cyclical component) suggests the worse than expected performance is more likely to be cyclical in nature as the government allows the automatic stabiliser to operate fully.
"(...) We expect public borrowing for FY 2012-13 to be £123bn (excluding the effect of the Royal Mail Pension Transfer), slightly higher than OBR forecast of £120bn.
"Two years into the deficit reduction plan the government has so far over-delivered on spending cuts. If the weak economy continues to push borrowing higher, more cuts may have to be brought forward if the government is to achieve its fiscal objectives."
Datafeed and UK data supplied by NETbuilder and Interactive Data.
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