Levels of government borrowing at lowest in almost ten years

Government borrowing has reached its lowest level in nearly a decade, but the Chancellor has overshot his independent target for shoring up the public finances.
Chancellor Philip Hammond will gain some cheer from the figures just weeks before the General ElectionChancellor Philip Hammond will gain some cheer from the figures just weeks before the General Election
Chancellor Philip Hammond will gain some cheer from the figures just weeks before the General Election

The Office for National Statistics (ONS) said public sector net borrowing, excluding banks, dropped by £20 billion to £52bn for the financial year to date - April 2016 to March 2017 - in contrast to the same period the year before.

It was the lowest year-to-date borrowing figure since the financial year ending March 2008, the agency said.

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However, the Government came in shy of the financial year target of £51.7bn set by the the Office for Budget Responsibility (OBR) in the Spring Budget.

Borrowing, excluding banks, rose by £800m to £5.1bn last month, with economists pencilling in a lower figure of £3bn.

Chancellor Philip Hammond will be cheered by the performance of the UK’s public finances after coming within a whisker of hitting the full-year target as the Government gears up for the General Election on June 8.

Howard Archer, chief UK and European economist at IHS Markit, said: “Essentially meeting the revised 2016/17 fiscal target is a boost for the Chancellor’s credibility after he embarrassingly scrapped his March budget plans to raise national insurance contributions for the self-employed.

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“Public finances over 2016/17 benefited from the resilience of the economy and a strong labour market which lifted tax receipts. Indeed, corporation tax receipts were at a record high of £55.7bn in 2016/17.”

The OBR, the Government’s fiscal referee, said in March that it had expected Mr Hammond to undershoot previous borrowing targets for this financial year, revising its outlook from £68.2bn to £51.7bn.

It came after the Chancellor ditched his predecessor’s target of balancing the books by 2020, vowing instead to put the public finances back in the black ‘’as early as possible’’ in the next Parliament as part of a new Charter for Budget Responsibility.

However, the OBR also warned that smaller deficit hikes in four years time, coupled with cost pressures for an ageing population, meant Mr Hammond was unlikely to meet this fiscal target.

On debt, the ONS said public sector net debt excluding state-owned banks climbed by £123.5bn to £1,729.5bn, equivalent to 86.6% of gross domestic product.