Public coffers get oil boost but outlook grim

By Christina Fincher and Jeremy Lovell

LONDON (Reuters) - Bumper tax receipts from North Sea oil companies boosted public coffers in July but a deteriorating underlying picture left the government little hope of meeting its full-year borrowing forecast.

Although July's surplus was slightly higher than analysts had forecast, government borrowing for the first four months of the financial year was nearly 11 billion pounds higher than the same period last year.

In March, Chancellor of the Exchequer Alistair Darling forecast borrowing of 43 billion pounds for the full financial year. This figure looks increasingly challenging with a slowing economy set to erode tax receipts and increase social security spending.

"The full-year figures are going to be significantly worse than the Chancellor's forecast of 43 billion pounds -- possibly 50 or 60 billion even," said Jonathan Loynes at Capital Economics.

Official data on Wednesday showed the public sector posted a net cash repayment of 12.6 billion pounds last month, higher than the 10 billion pounds forecast by analysts but less than the 13.3 billion pounds repaid in July 2007.

The government's preferred accruals-based measure -- which is less volatile than the cash measure -- showed a surplus of 4.8 billion pounds, slightly higher than the 4.3 billion forecast.

STORM CLOUDS GATHER

Government borrowing in the first quarter of the financial year was the highest in any quarter since records began in 1946 and analysts said July's surplus did not alter the deteriorating trend.