Borrowing falls by £2.6bn due to lower spending

GOVERNMENT BORROWING fell by more than expected last month after UK finances benefited from lower public spending and a £1.2bn rebate from the EU.

Figures from the Office for National Statistics show public-sector net borrowing, excluding state-owned banks, fell by £2.5bn to £2.6bn in December, compared to £5.1bn a year earlier.

Economists had been expecting a figure of between £5bn and £6bn.

It was helped by a £1.2bn credit from the European Union, the ONS said, resulting in the lowest December net borrowing figure since 2000.

That rebate was the result of a smaller than expected EU budget in 2017, as well as updated economic forecasts that resulted in adjustments to member state contributions.

However, that rebate has already been accounted for by the UK’s Office for Budget Responsibility as part of its November forecasts.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added that the low public borrowing figure for December reflected “falling government spending, not a resurgent economy”.

“Departmental spending fell by 3.1 per cent year-over-year, compared to an average rise of 1.9 per cent in the first eight months of 2017/18,” he explained.

Sterling was barely moved by the figures, having already been trading lower against major peers in morning sessions.

The pound was down 0.3 per cent versus the US dollar at around 1.394, and down nearly 0.2 per cent against the euro at 1.138.

The ONS also detailed the deficit excluding banks for the current financial year – April to December 2017 – showing it dropped by £6.6bn to £50bn.