ALISTAIR Darling has been warned he still faces an uphill struggle to meet his full-year borrowing target despite bumper oil tax revenues boosting the public coffers last month.
Official figures yesterday showed the public sector paid back a net £4.8 billion in July, higher than the £4.3bn forecast in the City.
Corporation tax receipts were almost £10bn, with some £4bn coming from North Sea companies, more than twice as m
uch as a year earlier.
July is traditionally a strong month for tax receipts.
However, the data also revealed that overall net borrowing stood at £19.1bn in the first four months of the financial year – April to July – £10.7bn more than in the same period last year.
Analysts said last month's better-than-expected public finance figures did little to change the deteriorating mid-term outlook.
The Chancellor has a full-year borrowing target of £43bn but many experts estimate that the figure could finish up closer to £50bn or even higher as a slowing economy erodes tax receipts and increases social security spending.
Richard Mcguire, a strategist at RBC Capital Markets, said: "The public finance figures do nothing to alter the broad concern that the government, on a medium-term view, is suffering considerable fiscal slippage."
CEBR economist Charles Davis added: "The outlook remains challenging for government.
"With borrowing and debt on a clear upward trend and the economy set for a period of minimal growth and even contraction, public finances look susceptible to further unscheduled borrowing."
He described the Treasury's forecast for 2009 GDP growth of between 2.25 and 2.75 per cent as "hopelessly optimistic".
As a percentage of GDP, public-sector net debt jumped to 37.3 per cent last month, up from 36.1 per cent in July 2007. Under the government's sustainable investment rule, that ratio must not exceed 40 per cent.
Despite the fiscal boost from North Sea operators, thanks to soaring global oil and gas prices, corporation tax from other companies was lower than last year when receipts were boosted by the setting up of real estate investment trusts (Reits).
Shadow chancellor George Osborne called yesterday's figures "dreadful" and claimed borrowing was "out of control".
He said: "Gordon Brown has failed to put aside money for a rainy day during the good years, and taxpayers will bear the price for his economic incompetence."
Darling announced a review of the government's fiscal rules last month after net borrowing hit £24.4bn in the first quarter of the financial year – the highest in any quarter since records began in 1946.
A Treasury spokesman said the government was "meeting its strict fiscal rules".
The full article contains 448 words and appears in The Scotsman newspaper.
