By Jon Sindreu and Jason Douglas
LONDON--Fines paid by banks to resolve allegations of
manipulating the foreign-exchange market provided a boost to U.K.
public finances in November, but closing the budget deficit in time
to meet the government's forecasts still looks like a difficult
task for treasury chief George Osborne.
The U.K. borrowed GBP75.8 billion ($118.7 billion) in the eight
months to November, the Office for National Statistics said Friday,
which is slightly lower than the year-earlier period. Excluding the
GBP1.1 billion boost from the fines in November, the budget deficit
would have been larger than the previous year's eight-month
period.
The economy is going to be one of the main issues for voters in
the coming general election in May, and U.K. Treasury chief George
Osborne has made the rebalancing of public finances a priority.
While he has significantly reduced the deficit, it hasn't shrunk as
quickly as he hoped. One key headwind is that sluggish wages have
meant tax revenue has failed to grow at the same pace as the
recovering British economy.
The U.K.'s independent fiscal watchdog, the Office for Budget
Responsibility, recently revised its forecast for Britain's budget
deficit, saying it now expects it to be GBP91.3 billion for the
fiscal year ended March 2015--compared with a previous forecast of
GBP86.4 billion. With four months remaining, the U.K. government
has already borrowed 83% of that amount, even after taking account
of the one-off windfall provided by the forex fines.
"We continue to doubt that in future years the recovery will be
as tax-rich as the OBR expects and that the next government will be
able to reduce spending in line with the current fiscal plans,"
said Samuel Tombs, economist at Capital Economics, in a research
note released Friday.
The fines were levied in November on five banks operating in the
U.K.-- UBS, Citibank, J.P. Morgan, Royal Bank of Scotland and
HSBC--and are the highest ever imposed by the British banking
regulator, the U.K.'s Financial Conduct Authority, or any of its
predecessors. The banks didn't dispute the charges.
The fines will be used to create a GBP1 billion fund to pay for
new primary health care facilities across England, the U.K.
Treasury has said.
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