LONDON (Reuters) - Britain's government borrowed slightly more than expected in December as spending grew faster than income in a struggling economy, thwarting efforts to erase a large budget deficit.
ECONOMISTS' VIEWS
PETER DIXON, COMMERZBANK:
"One month's figures don't tell you the full story but I think what is interesting is that you now have a view for the whole of calendar 2012.
"Looking at the figures, it does suggest that PBRS declined to about 100.9 billion, which I think is 6.4 percent of GDP, which represents a considerable improvement on the figure of 7.9 percent the previous calendar year.
"There are indications that the UK public finances are improving. They are not improving as rapidly as the authorities want them to but they are moving in the right direction and I think it all goes to confirm my long-standing view that the public sector finance correction process is going to be long and drawn-out. We can't expect any magic bullet to resolve that problem for us."
"There's clearly no need to intensify the fiscal squeeze in order to placate the ratings agencies because I think that would be a self-defeating policy... I don't think there is a huge amount of room for a fiscal relaxation but at the same time, I think the prospect of tightening is not a likely one.
"It's often forgotten or often overlooked that the reason why UK growth was so sluggish last year was not really down to state sector...it was basically the weakness of the euro zone which killed imports... On the assumption that we get a bit more growth, certainly we ought to get a bit of boost to the revenue side of the account."
JAMES KNIGHTLEY, ING:
"The disappointment has come from the tax side mainly, with income tax revenues, corporation tax revenues and VAT revenues all down on the same period for financial year 2011/12.
"This highlights the weak state of the UK economy and the fact that austerity measures are failing to generate the improvement in government finances that were hoped for.
"Government cash outlays are down, but this is purely down to lower interest costs resulting from the plunge in gilt yields, helped by Bank of England purchases and the UK's relative safe haven status. However, the question is how long the UK can hold onto its AAA status.
"With the United States and France having been downgraded by one ratings agency in the past couple of years, another disappointing UK borrowing number and a widely expected contraction in fourth quarter GDP on Friday will intensify the threat of the UK suffering the same fate."
GEORGE BUCKLEY, DEUTSCHE BANK:
"The UK budget deficit - PSNB ex financial sector interventions - came in broadly as expected ... in December.
"Since the figures are non-seasonally adjusted we have to compare that number with the previous December. It was 0.6 billion pounds more, which compares to the average monthly rise in the deficit in the fiscal year to date of about 0.8 billion pounds per month.
"With the November deficit revised down by 1 billion pounds in today's report this is reasonably encouraging news. If in the final three months of the fiscal year 2012-13 we were to see the same average overshoot of the deficit as we have since April, this would lead to a deficit of ?131bn (ex Royal Mail) for the full year. This compares to the OBR's ?108.5bn forecast. Whether this is met will depend crucially on Jan's self-assessment receipts."
TOM VOSA, NATIONAL AUSTRALIA BANK:
"In line with expectations, but we're still trying to work out how the government believes they're going to meet their borrowing requirement this year, because they still seem to be some way off from the target announced in the Autumn Statement.
"They must really be hoping for a big surplus now in January ... with the newspaper reports over the weekend of HMRC (tax authority)'s new focus on middle-class tax avoiders.
"The good news is that it suggest the public sector essentially has supported the economy in the fourth quarter and ahead of GDP data on Friday. Again, as we've seen all the way through this age of austerity, the one thing that has really been growing in line with GDP has been public sector spending, and that appears to be continuing.
"But overall, without further downward revision to borrowing data or a significant increase in income in January, it's difficult to see how the government will meet its borrowing targets."
PHILIP SHAW, INVESTEC:
"December's outturn is pretty much in line with market expectations. Going back, the revisions are modestly favourable, but really the deficit is still in line to overshoot the Office for Budget Responsibility's forecasts from the autumn statement last month.
"There are no signs of progress in the public finances ... following the widening trend in the deficit through much of last year.
"Really what the chancellor (George Osborne) must be hoping for is a resumption of growth, not least to get borrowing down.
"We are of the view that fourth quarter 2012 will be close to flat. Perhaps relative to consensus that is not a bad out-turn, but in absolute terms it is extremely disappointing."
(Reporting by UK economics team)
Source: http://news.yahoo.com/instant-view-december-psnb-ex-touch-higher-expected-094303266--business.html
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