Borrowing in August hit 10-year low

Rising tax receipts helped government borrowing hit its lowest level for a decade in August.

New figures from the Office for National Statistics (ONS) showed the Government’s deficit narrowed to £5.7bn last month, compared with £7bn a year earlier.

The figure is the lowest net borrowing figure for a month since August 2007.

It means government borrowing for the current financial year – April to August – eased back by £200 million to £28.3 billion, also the lowest level for 10 years.

The Office for Budget Responsibility has forecast borrowing to come in at £58.3bn for the financial year ending in March 2018.

Government tax receipts rose £1.8bn to £54.6bn in August, while spending dropped by £100m to £54.8bn.

The ONS said public sector net debt, excluding state-owned banks, jumped by £150.9bn to £1,773.3bn in August, equivalent to 88% of gross domestic product.

VAT receipts rose by 5.6% from last year to £11.6bn, a record for August.

Prime Minister Theresa May has vowed to deliver a balanced budget by the “middle of the next decade”, knocking back Chancellor Philip Hammond’s previous target of putting the public finances back in the black by 2020.

Howard Archer, chief economic adviser at EY ITEM Club, said the result was a boost for the Chancellor as November’s budget looms.

He said: “The public finances saw the smallest August deficit since 2007 after seeing a surplus in July for the first time since 2002.

“The public finances were boosted in August by record VAT receipts for the month (up 5.6% year-on-year) which ties in with strong retail sales growth.

“The ONS also reported that taking July and August together, receipts from income-tax self-assessments were up £0.4 billion to a record £9.4 billion.

“A still lacklustre economy and higher interest debt payments look likely to weigh down on the public finances over the coming months.

“Nevertheless, it looks increasingly like the Chancellor will have some wiggle room in November’s budget.”

The latest borrowing figures have given a boost to Chancellor Philip Hammond.