22 Jul 2014
Improvement in UK public sector finances is painfully slow - ING
FXStreet (Łódź) - James Knightley from ING observes that despite the pickup in growth and thriving labor and property markets in the UK, public sector finances are still in poor condition.
Key quotes
"The fiscal year to date (only April and May admittedly) saw the government borrow £2bn more than it did in the same period last year with government receipts down £3.2bn while expenditure was only lower by £1bn.
"Today should show a modest improvement, but it is unlikely to alter the story significantly."
"Part of the disappointment relates to the fact that the cut in the top rate of tax from 50% to 45% last year meant that some high earners (and their employers) delayed bonus payments and other forms of income to take advantage of the lower tax rate."
"Stamp duty receipts have also disappointed and coincide with a sharp drop in mortgage approvals following the introduction of the Mortgage Market Review in April."
"That said, there are improvements in other areas. VAT receipts are up 5.7%, which presumably reflects stronger consumer spending while corporation tax receipts are up 9.3%."
"We believe that the tax revenue figures will improve though given the strength of job creation and the anticipation that wages will eventually start to pick-up – note the national minimum wage will increase 3% in October."
"However, we are not confident on a quick turnaround given the history of disappointment while there is some concern that growing talk of Bank of England rate hikes may make households and businesses a little more cautious, which could hurt VAT and stamp duty receipts."
"This suggests that government spending will continue to be kept on a tight leash while the prospect of a significant preelection inducement to the electorate is looking less and less likely."
Key quotes
"The fiscal year to date (only April and May admittedly) saw the government borrow £2bn more than it did in the same period last year with government receipts down £3.2bn while expenditure was only lower by £1bn.
"Today should show a modest improvement, but it is unlikely to alter the story significantly."
"Part of the disappointment relates to the fact that the cut in the top rate of tax from 50% to 45% last year meant that some high earners (and their employers) delayed bonus payments and other forms of income to take advantage of the lower tax rate."
"Stamp duty receipts have also disappointed and coincide with a sharp drop in mortgage approvals following the introduction of the Mortgage Market Review in April."
"That said, there are improvements in other areas. VAT receipts are up 5.7%, which presumably reflects stronger consumer spending while corporation tax receipts are up 9.3%."
"We believe that the tax revenue figures will improve though given the strength of job creation and the anticipation that wages will eventually start to pick-up – note the national minimum wage will increase 3% in October."
"However, we are not confident on a quick turnaround given the history of disappointment while there is some concern that growing talk of Bank of England rate hikes may make households and businesses a little more cautious, which could hurt VAT and stamp duty receipts."
"This suggests that government spending will continue to be kept on a tight leash while the prospect of a significant preelection inducement to the electorate is looking less and less likely."