UK Budget Deficit Widens In First Half Of FY20

The UK budget deficit widened in the first half of the fiscal year raising the possibility of the government overshooting the target in 2019-20, after a decade-long austerity.

During the April to September period, the budget deficit climbed 21.6 percent on a yearly basis to GBP 40.3 billion, data from the Office for National Statistics showed Tuesday.

The budget deficit figure suggests that the government is on the course to miss its target of keeping the deficit below 2 percent of GDP this fiscal year.

Chancellor Sajid Javid earlier said he is “turning the page on austerity” and vowed spending rises in his budget statement on November 6.

The chancellor would have to tighten fiscal policy to meet the rule that borrowing should be no more than 2 percent of cyclically adjusted GDP in 2020/21, Thomas Pugh, an economist at Capital Economics, said.

This is one reason why the chancellor has already announced that he will review the fiscal rules in the Budget, Pugh noted. There is a high chance that the chancellor will loosen fiscal policy at the Budget.

Receipts increased 2.8 percent and expenditure grew 4.5 percent in the first half of the year.

In September alone, public sector net borrowing excluding banks increased to GBP 9.4 billion from GBP 8.8 billion last year. This was the first September year-on-year increase for five years and above the forecast of GBP 9.3 billion.

At the end of September, public sector net debt excluding banks came in at GBP 1.79 trillion or 80.3 percent of gross domestic product.

In the current financial year-to-date, central government net cash requirement was GBP 32.9 billion. This was GBP 13.5 billion more than in the same period in the previous year.

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