The UK government aims to bring an end to the nation’s current account deficit before the end of the current parliament. The aim is that the UK’s balance of payments will be in surplus and therefore (in principle) that the national debt will cease growing (this may not be the case because interest due on the debt may exceed net receipts). Of course, making any significant inroad into the UK’s national debt of approximately £1.7 trillion (roughly £27000 per citizen living in the UK) is an entirely different matter.
Plans to tame the deficit took a set-back in April as borrowing came in at £7.2 billion, £600 million more than anticipated. The figure is still below the comparable figure for 2015 which came in at £7.5 billion. The shortfall has been linked to weaker than projected corporation tax receipts. Receipts were down by 5.1% over the previous year, coming in at £5.8 billion (for comparison, Google posted a pre-tax (well…) profit of $14.5 billion in 2013).
The Office of National Statistics (ONS) believes that borrowing for the year to the end of March 2016 came in at £76 billion, overshooting a previous estimate by £2 billion and £3.8 billion above projections from the Office for Budget Responsibility. The overshoot has been blamed on weaker than expected National Insurance receipts which are paid by employees.
On the positive side, ONS confirms that public sector borrowing has been falling since the 2009-10 high water mark and is currently half of that level, having dropped by a further £15.7 billion last year. The peak in borrowing was due to the (downstream) extraordinary measures that were put in place to defend against the worst effects of the Global Financial Crisis.
The UK national debt is approximately 83.3% of GDP – this is well above the 60% threshold set by the EU as one of the convergence criteria for joining the Euro, not that anybody in the UK is contemplating that anytime soon.
The UK increased property sales tax (the so-called Stamp Duty) in April, netting a record £1.3 billion, but possibly dampening housing market activity as a result.
The Chancellor of the Exchequer is hoping to bring the deficit down to £55.5 billion in the current financial year, meaning that £20.5 billion needs to be saved this financial year over last year’s level.