UK public finances make good start to new fiscal year

While April's figures bring more good news on the current health of the UK's public finances, a major and painful re-intensification of the fiscal squeeze will still be required for the Government to obtain an overall budget surplus in this parliament. Borrowing on the PSNB ex public sector banks measure of £6.8bn in April was 27% below the £9.3bn in April 2014. The OBR expects the deficit to be only about 14% lower this year as a whole.

However, estimates for borrowing in the early months of the fiscal year should be taken with a pinch of salt as they are based on more forecast data than those for later months. In addition, the reduction in borrowing is primarily a reflection of a sharp 7.4% decline in overall current expenditure, concentrated in lower departmental spending. 

It is highly unlikely that this pace of spending cuts can be maintained in future months. Accordingly, the Chancellor is unlikely to have spare funds to dispense at the Summer Budget on 8th July, and any steps towards the Conservatives' unfunded manifesto tax and spending commitments will require extra revenue-raising measures or deeper cuts to other departments' budgets than already planned by the coalition.