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UK budget deficit grows to more than £10bn as people spend less

Britain’s budget deficit rose to more than £10bn last month as weak VAT receipts caused by slower consumer spending took their toll on the public finances.

Data from the Office for National Statistics illustrated that the government continues to spend more than it receives in tax receipts eight years after the end of the deep recession triggered by the financial crisis.

The ONS said the £10.4bn deficit in April was £1.2bn higher than in the same month a year earlier. City analysts had been expecting the deficit to fall to £8.9bn.

Annual spending growth of almost 6% exceeded a rise of almost 4% in tax receipts, reflecting the slowdown in the economy’s growth rate from 0.7% in the final three months of 2016 to 0.3% in the first quarter of 2017.

Borrowing in 2016-17 was lowered by a number of one-off factors that will not be repeated this year. As a result, the Office for Budget Responsibility has forecast that the deficit will rise to £58bn in 2017-18. Scott Bowman, an analyst at Capital Economics, said that since April was the first month of the financial year it was too early to say whether the forecast would be met.

There was better news for the chancellor, Philip Hammond, from the ONS’s revisions to the deficit in 2016-17, which was cut by £3bn to £49bn – the lowest since the economy was close to recession in 2007-08.

The ONS also published experimental figures breaking down the overall UK deficit into its regional components. These showed that three regions – London, the south-east and the east of England – ran surpluses while all the others were in the red.

In 2015-16, London had a fiscal surplus of £3,070 per head – the biggest of any part of the UK. Northern Ireland recorded the biggest deficit at £5,440 per head. Scotland’s deficit per head of population, at £2,824, was adversely affected by the plunging oil price.

Tax receipts per head in London of £15,750 were almost double those in the two regions raising the least revenue – Wales at £7,980 and the North East at £8,200 respectively.

Northern Ireland and Scotland saw the highest expenditure per head, at £14,020 and £13,050 respectively, with the lowest expenditure per person in the south-east and east of England at £10,580 and £10,590 per head.