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London - Britain had the highest August budget deficit for three years as the tax take from individuals and companies dropped.
Spending exceeded revenue by £12.1bn compared with a deficit of £10.7bn a year earlier, the Office for National Statistics said in London on Tuesday. Economists in a Bloomberg survey had forecast a £9.2bn shortfall. Government income fell 0.6% and spending climbed 1.6%.
The statistics office cautioned against reading too much into the increase in borrowing, saying it reflected a drop in self-assessed income tax payments from the large amount paid in July. Taking the two months together, the £8.5bn received was the highest on record.
The figures leave Chancellor of the Exchequer George Osborne on track to meet his target of cutting the deficit to £69.5bn of gross domestic product, in the fiscal that began in April. In the first five months, borrowing declined by 10.3% to £38.4bn from £42.8bn a year earlier.
The pound stayed lower against the dollar after the data were published, and traded at $1.5470 at 10:31, down, 0.2% from Monday.
Osborne has pledged to return Britain to surplus by 2020 by continuing the squeeze on spending that helped bring down the deficit from a record 10.2% of GDP in the aftermath of the financial crisis.
China slowdown
While rising employment and wages are boosting tax receipts, much may depend on how well Britain weathers the slowdown in China, where Osborne is currently leading a British delegation to promote business and cultural ties, and the strongest pound since 2008.
Recent figures suggest the UK economy lost some momentum going into the second half.
Government income fell 0.6% last month, with self- assessed receipts falling by more than a half to £600m, the lowest August on record.
July sees large amounts of such tax paid and there was less of a spillover into August compared with previous years, the ONS said. Corporation tax fell 14% from a year earlier.
Spending rose 1.6%, driven by higher day-to-day running costs at government departments. There was a budget deficit of £706m in July, revised from the £1.3bn surplus estimated last month.
The measure used to calculate how much the Treasury needs to borrow in the financial markets showed a deficit of £235m last month. The figure includes £2.1bn from the sale of government shares in Royal Bank of Scotland Group and £600m from the disposal of Lloyds Banking Group stock.
Net debt was little changed at £1.5trn of GDP.
