U.K. posts first January deficit

By , Guest blogger

Traditionally, the British government has a large surplus in its finances in January as January is the time when corporations make a large part of their tax payments. In January this year the surplus was only £1.2 billion, down from £10.2 billion, reflecting both a big drop (7.6%) in revenues and a big increase (9.8%) in spending. If you take the high inflation rate into account, the drop in government revenues were even greater while the increase in spending was smaller.

And it is even worse if you use the normal accounting principles for government finances. The U.K. government has the unusual principle of not counting spending it calls investments as spending, despite the fact that these "investments" do not generate any visible return for the government. If you had also included borrowing for "net investments" (which most government accounts do), then the surplus of £5.3 billion in January 2009 swung to a deficit of £4.3 billion.

For the first 10 months of the fiscal year, the official deficit rose from £36 billion to £90.7 billion, while the deficit using normal accounting methods rose from £58.4 billion to £122.4 billion.

Recommended: Could you pass a US citizenship test?

While government revenue is partly a lagging indicator, the fact that it keeps falling is clearly a sign that the recovery is very weak at best, something that is confirmed by other indicators as well (see here and here).

Add/view comments on this post.

---------------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Their postings appear here on the Monitor's Money site as well as on their own individual blog sites. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the blogger's own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...