Breathing space for Philip Hammond as borrowing hits 16-year low

Irving Hamilton
October 19, 2018

Borrowing in September this year stood at £4.1bn, almost a billion less that the same month in 2017 and the best September figure since 2007, according to data from the Office for National Statistics.

Wishart said he expected that given the better than expected data in the first five months of the fiscal year, the OBR will likely revise down its borrowing this year from £37bn to £33bn in its budget forecast.

Philip Hammond's plan to bring down the government's annual borrowing was back on track last month after a blowout in August that knocked the chancellor off course.

So far in this financial year, April to September, borrowing totals £19.9bn, down 35% on the same period last year and the lowest figure for this stage of the year since 2002. A Reuters poll of economists had pointed to a reading of 4.5 billion pounds.

That is £3.4bn higher than a year earlier, but lower as a percentage of GDP than in 2017, when it was 86.7%.

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"The public finances have continued to improve rapidly this year, enabling the chancellor to accommodate plans for higher NHS spending without raising other taxes or cutting spending in other departments more aggressively over the next couple of years", Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said.

Hammond has said he is aiming for a budget surplus by the mid-2020s and he also wants to steadily cut national debt as a share of GDP which he says is too high to easily support a big rise in public spending during a future deep recession.

"That said, the Prime Minister is using the promise of higher spending as a bargaining chip to corral her MPs into supporting her Brexit plan".

In March, Britain's Office for Budget Responsibility said it expected the shortfall between how much the government spends and how much it earns from tax revenues to fall this financial year to 37.1 billion pounds, or 1.8 percent of GDP.

She said that apart from health, other areas such as social care, prisons and local government all showed a "dire need" for more funds. "An extra £16.6bn could give the chancellor some room to respond to the potential challenges".

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