Hammond under Budget pressure after increase in borrowing

PHILIP HAMMOND will be under more pressure in his Budget after Government borrowing jumped in August, with slower growth in tax receipts and higher spending hitting what had been a rosy picture.

The deficit was £6.8bn last month, the Office for National Statistics said, up £2.4bn compared with August 2017.

It ends the recent trend of falling borrowing, which has brought down the deficit for this financial year to £17.8bn, £7.8bn lower than the same period last year.

Despite August’s increase this still leaves the Treasury on track for the smallest annual deficit since 2002. The increase was caused by a 6.7pc rise in total Government spending, which hit £64.9bn in August, while tax revenues increased by just 1.9pc, the slowest annual growth this financial year.

Rising departmental spending, contributions to the EU and investment all contributed to higher spending, while weaker growth in corporation tax, lower tobacco and alcohol duty revenues and falling stamp duty payments hit receipts.

“The public-sector finances continue to perform slightly better than forecast, with growth remaining steady over the summer. Nevertheless, despite some successes in reducing borrowing and a smaller deficit, there have been no inroads made yet into the debt and, if the economy does face a downturn following Brexit, it is likely that borrowing will have to increase again,” said Ross Campbell at the Institute of Chartered Accountants in England and Wales. “When the pledge to increase health spending by £20bn and the potential £10bn cost of the UK satellite navigation system are taken into account, the Government is likely to have to start writing some big cheques soon.”

The Chancellor is already looking to find taxes to raise to pay for the extra NHS funding, amounting to £20bn per year by 2023.