Hammond handed Budget boost as debt drops £10bn
A GOLD-PLATED budget boost was handed to Chancellor Philip Hammond yesterday as figures revealed state borrowing had fallen to its lowest level in 16 years.
It means the Chancellor will have the cash to deliver a funding boost for hard-pressed families and cashstrapped public services in the Budget later this month.
The overall budget deficit for the financial year to September stands at £19.9billion – £10.7billion lower than for April to September last year – the lowest for this stage of the year since 2002.
And Government borrowing in September fell to an 11-year-low for that month, the Office for National Statistics revealed.
Public sector net borrowing, excluding state-owned banks, was £800million lower in September than in the same month last year.
Mr Hammond tweeted: “We’ve made strong progress fixing our finances, so we can support public services, keep taxes low and keep debt falling. We’re building an economy that works for everyone.”
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The Capital Economics research company said of the September figures: “While the improvement in public finances for the whole fiscal year is unlikely to be quite so stark, the Chancellor looks set to have a little more room to deliver on recent spending pledges when he presents the Budget on October 29.”
On current trends economists expect borrowing to total around £25.9billion for the whole financial year – £11.1billion less than previously forecast.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The public finances have continued to improve rapidly this year, enabling the Chancellor to accommodate plans for higher NHS spending without raising other taxes or cutting spending in other departments more aggressively over the next couple of years.
“Real-terms increases in NHS spending mean other departments will have to endure further cuts but Mr Hammond needn’t intensify them.”
Howard Archer, chief economic adviser to the EY ITEM Club, said: “Helpful news for Chancellor Philip Hammond as he prepares his Budget, as the public finances saw a lower year-on-year shortfall in September, thereby completing a markedly improved performance over the first half of fiscal year 2018-19.”
He noted that there was also further good news with the August borrowing figures also being revised down from previous estimates.
Government tax receipts were up by a “very decent” 4.4 per cent compared to last year’s April to September period, he added, boosted by higher employment, improved growth and strong summer retail sales.
Mr Archer added: “The Chancellor will be heartened by the 2018-19 fiscal year performance so far. It does give him some much-needed room for manoeuvre in the Budget as he looks to find the extra funding needed for the high-profile increased spending promised for the NHS.
“Even so, it looks like he will still need to raise some taxes – or reduce tax relief in some areas – to help finance the increased NHS spending.” There is speculation the Budget will include further restrictions on tax relief that higher earners can get on their pension contributions.
Senior Conservative MP John Redwood said: “Philip Hammond is too mean on public spending and he’s not giving the tax cuts we need to promote growth.
“We need those tax cuts and we can afford to do it, as these borrowing figures further illustrate. The question for the Chancellor is: Why is he squeezing the economy so far?”
The former Cabinet minister said growth had also been slowed by the Bank of England limiting credit availability and raising interest rates. They blame it on Brexit but it’s nothing to do with that. It’s domestic policy,” said Mr Redwood.
The ONS figures showed the growth in income tax and VAT receipts had more than offset a sluggish housing market and lower stamp duty revenue.
Latest labour market figures show unemployment at a 43-year low of four per cent of the workforce and shops were boosted by World Cup-related purchases.
Meanwhile, lower inflation has sliced more than £3billion off interest payments on the state’s index-linked debts.
ONE of the great mysteries of the present Conservative Government is why they do not boast more about their economic success. Say what you like about that Eeyore of a Chancellor, Philip Hammond, but he has been getting on with the day job: borrowing is at its lowest since 2002, a notable achievement in anyone’s eyes. And that follows excellent employment numbers too.
There is no doubt that austerity took its toll on many families throughout this country: many have had a tough decade. But the economic prospects are getting better and better, austerity is at an end and there is everything to look forward to.
Brexit might be a headache but the future certainly looks bright on the other side.