The fiscal deficit for the first quarter of 2019-20 was £17.9bn*, £4.5bn more than the same period last year.
As illustrated by the #ICAEWchartoftheweek, this was £7.2bn more than an adjusted baseline of £10.7bn, taking account of economic growth since last year of 1.5%, and the net impact of inflation. Although the government benefited from a £0.8bn dividend from RBS, this was more than offset by £8.0bn in lower receipts, higher interest charges and higher spending.
The reduction in revenue of £1.1bn reflects higher national insurance and local government receipts of £1.2bn (£0.8bn and £0.4bn respectively), less £1.8bn in lower excise duties, stamp duties, income tax and corporation tax (£0.8bn, £0.3bn, £0.3bn and £0.4bn respectively) and £0.5bn from other taxes and other income.
The higher interest charges of £1.6bn were principally driven by uplifts on index-linked debt, with RPI running at 2.9% compared with CPI of 2.0% and the GDP deflator of 1.6%.
Spending increased by £5.3bn, with the government spending £3.8m more on goods on services and £0.8bn more in staff costs, while local authorities increased their outgoings by £0.7bn.
We should of course be cautious in over-interpreting these provisional numbers, especially as there are often differences in timing in both the revenue and spending lines.
However, the combination of weakness in the revenue line and higher spending than expected might be an amber warning for the incoming Cabinet. Whether that will dissuade the new Chancellor from getting out the chequebook is yet to be seen…
* Receipts of £191.8bn less outlays of £209.7bn (2018-19 Q1: £186.3bn and £199.7bn).