As the newly elected UK government increases public expenditure to meet its Brexit commitments, the country lands into a bigger deficit as compared to last year. On Wednesday, the Office for National Statistics made figures public, revealing that over first four months of the financial year (April-July), the country’s total borrowing shot up to £16bn, marking 60% rise from last year.
The rate of increase in government spending over revenue is worrisome as it is fastest in a decade. Last time the country was rolling down the financial road at a similar rate was in 2008-09, when it was battling with its worst financial crisis.
It all comes when Boris Johnson, who became the country’s head on July 24, announced that the government would be making tax cuts worth £20 billion, besides putting in extra billions to upgrade country’s social care, eduction, health and policing. Boris had earlier pledged to increase the numbers of police officials by 20,000, appoint more doctors, nurses and improve the condition of hospital buildings, put more funds in education sector, develop a high-speed rail link between Manchester and Leeds, and increase the country’s defence expenditure.
Johnson’s over ambitious promises exceeds Britain’s annual budget target by at least £8bn for this year. It leads to significant drop in government surplus, reaching £1.3bn in July 2019 as compared to £2.2bn in July 2018.
What weighed down the already burdened economy was a 0.5% slump in government revenues, contributed by increase in the personal allowance. Since the allowances are non-taxable, it lead to shrinking of Treasury’s revenues.
Johnson has been criticised by several lawmakers for spending liberally in the hour of economic slump, just to lure people with Brexit benefits, and prepare a solid ground for election.
The total budget to be allocated to different departments is said to be about £892bn.
The Office for Budget Responsibility, the government’s independent economic forecaster, has echoed similar warning as political analyst, adding that no-deal Brexit would damage UK economy, shooting up its public finances. It said that UK economy would need funds to recover from financial slump, hence it needs to put in finances wisely.The OBR earlier also predicted that exiting the EU without a deal would bring in recession forces, with government expending going up at the rate of 2.7%. Unfortunately, the Central government’s current expenditure has already exceeded OBR’s prediction and has been growing at the rate of 4.2% year on year in July.