By Max Clarke
Public sector borrowing, the Office for National Statistics yesterday revealed, declined both year-on-year and compared to the previous month.
Proponents of the Coalition Government’s deficit reduction programme saw the fall as vindication of their tough fiscal policy, whilst others said the small, £1.1 billion drop was not reward enough to justify the austerity measures that they feel are continuing to punish UK households, further damaging consumer confidence and delaying a more full recovery.
David Kern, chief economist at the British Chambers of Commerce provides his analysis on the result.
“The borrowing figures in May were broadly as expected, showing a small reduction compared with a year ago. But following the disappointing April figures, we believe that total borrowing for this financial year will be larger than forecast at the time of the Budget. Since economic growth is likely to be slightly weaker than predicted by the OBR, we can expect some shortfall in tax revenues.
“The scale of the deficit confirms the need to persevere with measures aimed at stabilising our public finances. There is no need or justification to consider a plan B. Economic growth, though frail, is likely to continue, and reducing the deficit will help improve the economy’s long-term prospects.
“However, in order to reduce short-term risks it is important for the MPC to maintain low interest rates for the next few months. On its part, the Government must implement policies to support growth and empower businesses to invest, export and create jobs.”
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