Government borrowing fell in 2012-13, revised figures show

George Osborne Three months into the fiscal year, borrowing remains on course to hit the government's target

Government borrowing fell in the 2012-13 fiscal year after all, the latest official estimate suggests.

Public sector net borrowing, excluding the cost of interventions such as the Royal Mail pension transfer, was revised down to £116.5bn.

It means that total borrowing actually fell, by £2.1bn, from the year before, contrary to a previous estimate in May.

The latest data from the Office for National Statistics also showed borrowing fell in June.

Public sector net borrowing in the month, excluding financial interventions, was £8.5bn, down 29% from the £11.9bn recorded a year ago. This was still somewhat higher than analysts' expectations for a figure of about £8bn.

Although tax revenues from households and businesses rose 15% during the month, borrowing by local governments also rose.

Borrowing for May was also revised up, due to a more cautious estimate of revenues from a tax agreement with Switzerland.

Nonetheless, three months into the fiscal year, the government remains on course to reduce the budget deficit in line with its forecasts.

"The government is taking tough decisions to deal with the deficit: today's data shows that borrowing fell last year," the Treasury said.

"While we can and will take nothing for granted, the economy is moving from rescue to recovery: the economy is growing; the deficit and unemployment are falling."

QE deal

Total accumulated government debt reached £1.2tn in June, or 74.9% of the UK's annual economic output.

The government's finances continue to benefit from a deal reached with the Bank of England last year regarding government debts bought by the Bank as part of its quantitative easing stimulus programme.

The deal does nothing to change the flow of money within the public sector, but changes the way in which the Treasury is able to account for its borrowing costs.

It allows the government to report its borrowing cost at the historically low 0.5% overnight interest rate currently by the Bank, instead of the much higher interest rate it pays on the debts that the Bank owns.

Excluding this effect, June borrowing was £12.4bn - half a billion higher than the figure a year ago.

The Office for Budget Responsibility (OBR) has forecast that total borrowing in the current fiscal year, excluding the effect of financial interventions and the deal with the Bank of England, will be about £120bn, or 7.5% of GDP.

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