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Osborne headache as public borrowing up £1.7bn

THE UK's public finances suffered a worse-than-expected start to the financial year as borrowing in April rose to £7.4 billion - £1.7bn higher than the same month in 2013.

The figure, which excludes the distorting effect of bank bail-outs, had been expected at £6.2bn.

However, separate economic figures from the Office for National Statistics were brighter, confirming gross domestic product (GDP) growth of 0.8% for the first quarter of the year.

Within this, the performances of the construction and manufacturing sectors were revised up from previous estimates, while household consumption rose for a tenth successive quarter.

But exports fell 1%.

Meanwhile, business investment rose 2.7% in the first three months of the year, the first time it has recorded five successive quarters of growth since 1998. It increased to £32.8bn, its highest level since the third quarter of 2008.

However, the data on public sector finances represent a headache for Chancellor George Osborne as the independent Office for Budget Responsibility (OBR) targeted an 11% fall in the deficit for the current 12-month period.

Borrowing for April by the OBR's preferred measure - excluding the effects of the Bank of England's quantitative easing asset purchase programme - was £11.5bn, £1.9bn higher than in 2013.

Central government receipts were 0.3% lower at £50bn against the same month last year, including a 29.8%, or £300million rise in stamp duties to £1.1bn and a £400m increase in VAT to £9.8bn.

But income tax collected fell £800m to £11.1bn.

Whitehall spending fell 1% to £63bn.

Underlying public sector debt was £1.271 trillion, or 75.6% of gross domestic product, up from 73.8% at the same time last year but a slight fall on last month's 76%.

David Kern, chief economist at the British Chambers of Commerce, said: "Our budget deficit is still too high and reducing it over the next few years will be a difficult task."

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