British public finances perk up in December

UK government borrowing narrowed more than expected in December, official data showed Tuesday, boosting beleaguered Conservative Prime Minister Rishi Sunak before a general election expected this year.

Public sector net borrowing almost halved to £7.8 billion ($9.9 billion) last month, the Office for National Statistics (ONS) said in a statement. That compared with £16.2 billion a year earlier and marked the lowest December level since 2019.

The reading was also significantly better than the official forecast of £14 billion by the Office for Budget Responsibility, the government’s fiscal watchdog. The improving public purse could provide wiggle room for the Conservative government to unveil sweeteners in their budget due March, analysts said.

“The pickup in the UK’s public sector finances comes at an opportune time for the government as they try to sweet talk voters ahead of the upcoming general election,” said Kathleen Brooks at trading firm XTB. Sunak’s Conservatives badly trail the main opposition Labour party in opinion polls, with the UK facing a dark economic outlook amid a drawn-out cost-of-living crisis.

Britain’s economy shrank 0.1 percent in the third quarter of last year and a fourth-quarter contraction would place it in a technical recession. Data on Friday showed that UK retail sales—a major driver of economic output—slumped in December by the largest drop since January 2021 as shoppers tightened their belts. That followed news of a surprise December acceleration in inflation to 4.0 percent, which is double the Bank of England’s official target. — AFP