Borrowing dip leads to lowest deficit in 10 years
THE Government borrowed £5.9bn in September, down 11pc on the year, to bring the deficit to its lowest level in a decade.
Higher income tax and VAT revenues boosted the public finances, giving Philip Hammond, the Chancellor, a boost before next month’s Budget. So far this financial year, the Government has borrowed an additional £32.5bn, down £2.5bn compared with the same period of 2016. This is the smallest deficit in a decade.
The national debt, excluding the bailed-out banks, stands at a new record high of £1.79 trillion, or 87.2pc of GDP – also a new high.
So far this year, current tax receipts have risen by 3.8pc to £334.5bn, outstripping the 3pc rise in current spending, which is up to £342.9bn.
At this pace the Treasury will borrow £42bn this financial year, well below the £58bn that was forecast in March. Mr Hammond could use this breathing space to put more money into key spending priorities next month.
“The indications are that in November’s Budget the Chancellor will focus on measures to help the young, boost housing and support productivity,” said Howard Archer, chief economic adviser to the EY Item Club.
“Additionally, the Government has already announced an ending of the 1pc public sector pay cap, with modest pay increases for the police (1pc rise and 1pc bonus) and prison workers (1.7pc) looking set to be followed with rises for teachers and NHS workers.”
Economists fear the improving trajectory may not last, however, with low productivity growth and a slower economy hitting future tax receipts. “Unfortunately, the trend will deteriorate toward the end of this fiscal year,” said Samuel Tombs at Pantheon Macroeconomics, noting that a rise in self-assessment payments at the start of 2017 came because of previous tax changes.