Borrowing in the UK may feel like it’s on the rise, but in fact September 2017 has seen the lowest deficit since 2007. According to The Office of National Statistics, public borrowing this September reached only £5.9 billion. This is much lower than the £6.5 billion expected by City of London analysts; and 11% down on last year.
It’s not just September however that saw a great reduction in borrowing. This August also saw a drop from £5.7 billion to £4.7 billion (as the ONS revised figures). In fact, 3 straight months in a row have seen a lower than expected forecast.
Image credit: Potapova Valeriya via 123RF
These rather encouraging figures means that the UK government are on course. To succeed in reducing the full-year borrowing forecast of an estimated £58.3 billion. The estimation was made by the Office for Budget Responsibility during the time of the March 2017 budget.
Is It All Good News?
Although this news comes as a positive boost, the Office for Budget Responsibility also hinted this year that productivity growth decline over a period of the next five years have a potential to counteract many near term advancements in public finance.
If they are right, Chancellor Philip Hammond will be left with little elbow room; for increased spending or inevitable tax cuts. This means he may not meet his own financial rules in time for his next budget, due on 22nd November 2017.
Image credit: Mykhaylo Palinchak via 123RF
“The net impact of these forecast changes is likely to be higher projected borrowing. This could more than offset the likely undershoot this year, so reducing the Chancellor’s fiscal wriggle room in the Budget.” says John Hawksworth, the Chief Economist at PwC.
Additional professional input from Samuel Tombs (Chief UK Economist of Pantheon) noted that the lower borrowing we’ve seen this year potentially reflects quite a tight grip on government spending over substantial tax receipts. VAT receipts are indeed on the rise. They are up 3.7%, however income and financial gains revenue was only up by 2.3%.
Image credit: Chris Dorney via 123RF
Despite the new figures over UK spending, the Treasury are intent on dispelling myths. Myths that this will result in improved finances or more space for higher public sector pay; or even public sector austerity becoming more at ease.
In response to these new figures, a spokesperson stated:
“Whilst we’ve made great progress getting the deficit down by over two thirds, government borrowing is still far too high at over £150 million a day. We will continue to take a balanced approach that deals with our debts and allows us to invest in our public services.”
Feature image: donatas1205 via 123RF