Government statisticians have had to drop predictions that the UK would claw back £3.2bn from Swiss bank accounts in a tax evasion clampdown after receiving just £342m, barely a tenth of the amount.
The news will be acutely embarrassing for the government as the prediction made in May about the gains from the one-off levy on Swiss banking deposits owned by UK residents allowed the government to narrow the level from £15.6bn in May 2012 to £12.7bn.
In its latest release on the state of the public finances, the Office for National Statistics said it would take a “more cautious approach” and track just how much money has been received, instead of planning for the £3.2bn forecast over the following financial year by the independent Office of Budget Responsibility.
“Labour warned two years ago that this deal had more holes than Swiss cheese,” said Labour’s shadow treasury minister Catherine McKinnell.
“If the full £3.2bn expected to be raised this year does not materialise – as the ONS are now rightly cautioning - it will be a further blow to George Osborne’s deficit reduction plan which has already stalled because our economy has flatlined for three years.”
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, told the Huffington Post UK: “The task was always overly ambitious, but at least we now have a reality check of the amount obtainable.
“The problem with any tax calculations around evasion is that by its very nature it is difficult to know how much is actually being evaded, so knowing what will be receivable under the UK-Swiss agreement is never going to be predictable.
“The additional difficulty is that individuals are unlikely to now keep their income in Switzerland and have it taxed or their names disclosed to the UK authorities, so they may have moved their income on to another location in light of the UK-Swiss agreement.”
The deal between the UK and Switzerland came into force from the start of 2013 but was met with scepticism by Labour and the Swiss Banking Association.
The Office for National Statistics admitted: “Last month ONS included the Office for Budget Responsibility forecast for the total tax likely to be received from the agreement (£3.2 billion) as this was the only available estimate at the time.
“The recent announcement by the Swiss Bankers Association has cast significant doubt regarding the amount that will finally be received. This suggests that a more cautious approach is now warranted and the payments will be included as and when payments are received. Under National Accounts rules the cash amount will be accrued to May 2013 meaning this month will continue to be revised until the full payment is received."
The statistics body's caution on tax predictions came as its latest figures showed Government borrowing rose around £500 million in June.
Public sector net borrowing, excluding distortions such as bank bailouts and quantitative easing (QE) cash transfers, soared in June to £12.4 billion from £11.9 billion a year earlier, the Office for National Statistics (ONS) said on Friday.