In a sign that Britain’s economic recovery could be on shaky ground, the Treasury started the fiscal year with a £2bn rise in public borrowing.
The government borrowed £11.5bn in April – up from £9.5bn a year earlier. This pushed up public sector net debt to £1.27trn in April, equivalent to 75.6% of GDP, the figures from the Office for National Statistics showed.
And while the UK’s debt continues to swell, interest is accumulating. Britain is on course to spend £52.1bn this year on debt interest payments alone – £1bn a week.
Meanwhile income tax receipts fell 7% to £11.1bn, partly attributed to people moving bonus payments into April 2013 instead of March to take advantage of the top-rate tax reduction to 45p, from 50p.
VAT receipts increased by 4% to £9.8bn in April, while revenue from stamp duty increased by 30% to £1.1bn over the year to April 2014.
A Treasury spokesman said the data underscored the need for the government to press on with its plan to eradicate Britain's budget deficit.
Public sector net borrowing was £7.4bn in April, £2.6bn higher than market expectations and £1.7bn higher than a year ago, the Office for Budget Responsibility (OBR) said after analysing the figures. However, the forecaster said that this is ‘unlikely’ to provide a ‘meaningful’ indication of public sector net borrowing for the whole year as ‘local authority borrowing figures are volatile and prone to revision.’
April was the first month of the 2014/15 financial year, during which chancellor George Osborne aims to lower the deficit, the difference between what the government spends and what it receives, to 5.5% of GDP.
The UK has one of the largest budget deficits in Europe. Recent figures by EU agency Eurostat showed the UK deficit was 5.8% of GDP last year, compared to 3% for the whole of the EU, 4.3% in France and almost zero in Germany.
On a more positive note, the ONS said business investment rose 2.7% in the first three months of the year, as official figures confirmed the UK economy grew by 0.8% in the first quarter of 2014.