VAT receipts be praised as public borrowings hit decade-low
Comment Martin Flanagan
The much better than expected public borrowing figures for August may free Philip Hammond’s hands a bit on spending in the forthcoming November Budget. And it looks, ironically, like the Chancellor partly has to thank UK consumers’ insouciance about living on tick.
Public sector net borrowing excluding state-owned banks fell 18 per cent to £5.7 billion last month, its lowest August level for a decade, following an unexpected surplus in July for the first time since 2002.
Crucially, the latest figures, much lower than a City consensus forecast of a deficit of about £7bn, saw the stretched UK public finances given a fillip by record VAT receipts in August, up 5.6 per cent.
That ties in with strong retail sales growth over the summer, and indicates that despite the cost of living exceeding average earnings growth, consumer spending is holding up. It strongly suggests many Britons are putting Brexit and the Trumpster in Washington to the back of our minds and merrily swiping the plastic.
Borrowing figures so far in the current financial year are also at their lowest for a decade. We should not get carried away, the UK still has far too much debt. But the data does provide a bit of a fig leaf for Theresa May’s tentative easing of the caps on public sector pay last week, and gives some latitude for the Chancellor to possibly usher in some Pr-friendly spending initiatives in areas like the health service and infrastructure in the budget. lows since 2009. BOE governor Mark Carney and two members of the Bank’s monetary policy committee are talking openly about the possibility as inflation has moved to within a whisker of 3 per cent. Unemployment is at 40-year lows. And consumer borrowing has unnerved some of our leading banks. Sceptics will say, yeah, tell me about it. In the economically buoyant summer of 2015 – 12 months before the Brexit vote – Carney gave a delphic speech that seemed to many observers to suggest interest rates could start to rise at the start of 2016. That’s 20 months ago and zilch. Even so, a rate rise now could even be portrayed as logical rather than threatening stability.