UK Government revenue dropping

From the department of America-sneezes:

Both key measures of the UK's public finances were further in deficit than expected in August, latest Office for National Statistics (ONS) figures show.

The government's preferred measure, of public sector net borrowing, was £9.1bn, against £6.7bn a year earlier.

The public sector net cash requirement was in deficit by £5bn, compared with £3.7bn in August 2006.

The figures could be a headache for Chancellor Alistair Darling, still dealing with the Northern Rock crisis.

The figures showed a sharp drop in corporation tax receipts, which almost halved to £704m from £1.28bn in August 2006, and a modest fall in VAT receipts.

However, the deficits follow record surpluses in July, meaning the government's overall borrowing target of £34bn for the full financial year may still be achievable.

August is traditionally a deficit month for the public finances and July tends to be a month of surpluses.

"The public finance data for August were substantially worse than expected, adding to Chancellor Alistair Darling's current woes," said Howard Archer at Global Insight.

"Public finances could be significantly hit over the coming months if the current financial market turmoil increasingly weighs down on economic activity," he added.

And David Page at Investec said: "On both measures the public finances were very disappointing."

This issue is a little bit more serious than the government getting a bit less money. What it indicates is that Britain's corporations have given substantially less in tax than what they were giving a while ago. Such a drop off in corporate tax revenue indicates that there is something amiss in the British economy, such as a recession.