Economy defies merchants of gloom
A BETTER outlook for public finances yesterday shows the economy is continuing to defy gloomy warnings about the fallout from Brexit.
Chancellor Philip Hammond is on course to meet his borrowing targets by a “comfortable margin”, according to official figures.
But experts also warned the budget deficit – the amount Government spending exceeds income – remains far too high.
The Office for National Statistics said public sector net borrowing dropped by £0.4billion to £6.9billion last month.
That was £0.2billion above economists’ expectations of £6.7billion. But the ONS also revised down November’s borrowing, from £12.6billion to £11.3billion – which means the public finances ended 2016 in better shape.
Borrowing for the year so far from April to December is 14.3 per cent or £10.6billion lower, at £63.8billion, than over the same nine months of 2015.
It puts the Government in line to meet the Office for Budget Responsibility forecast of £68.2billion borrowing for the whole of 2016-17 – although that prediction made in November was significantly higher than its prereferendum forecast last March of £55.5billion.
Martin Beck, of the EY ITEM economic forecasting “club”, said: “This leaves the Government well-placed to undershoot the OBR’s full-year forecast of £68.2billion by a comfortable margin.”
John Hawksworth, of accountancy firm PwC, said: “Overall, the somewhat better outlook for the public finances is consistent with the slightly better than expected performance of the economy as a whole since the EU referendum in June.” He added: “But the budget deficit remains uncomfortably high, so this will not give the Chancellor much additional room for manoeuvre in his Budget.”
Howard Archer, of IHS Global Insight, said: “Largely healthy tax receipts in December pointed to ongoing resilient economic activity with robust increases in corporation tax and income tax receipts.
“For now at least, the Chancellor looks solidly on course to – at the very least – hit the 2016-17 budget deficit target contained in November’s Autumn Statement.” A Treasury spokesman said there was “significant progress in repairing the public finances” by driving down the deficit over six years from 10 to four per cent of GDP income. But he added there was further to go.
Mr Hammond yesterday presented the updated Charter for Budget Responsibility, replacing his predecessor George Osborne’s pledge to balance the books by 2020.
The Government ruled last year the economy needs more flexibility to cope with uncertainties sparked by last June’s shock vote for Brexit.