Economy

Government borrowing hit 10-year low last month

Government borrowing hit 10-year low last month”

Public sector net borrowing excluding stakes in banks stood at £5.67bn in August, the Office for National Statistics revealed on Thursday, below the £6.9bn level from the same month past year and the consensus forecast for £6.4bn.

But Sterling weakened after the release, falling from GBP/EUR 1.1344 to 1.1320 in the half hour after the release and 1.3508 to 1.3484 for GBP/USD.

The figure is also below the 6.5bn consensus forecast.

LONDON-U.K. government borrowing in August declined on year as a rise in tax receipts outpaced a smaller increase in spending.

Current Government spending was down 0.1 per cent on a year earlier.

John Hawksworth, PwC's chief economist, said it was encouraging that the gap between government revenues and current spending had fallen relative to previous year, as central government receipts increased by 4% compared to an increase in spending of around 3%.

Augusts figure of 5.7bn was considerably below the Capital's consensus expectation of 7.1bn.

After August's low borrowing, the cumulative total in the fiscal year has reached £28.3bn, down £0.2bn on the same months of 2016/17 and the lowest for this stage since 2007.

At the Budget in March, the OBR had forecast borrowing for 2017-18 would be just over £58bn.

"The trend will deteriorate toward the end of this fiscal year, because a bumper batch of self-assessment receipts collected in January and February 2017, due to prior tax changes, will not be repeated". Expanding this to other public workers would be far more costly.

But the boost from Value-Added Tax made only a modest dent in the shortfall for the financial year since April, leaving the public debt still rising as a proportion of GDP. And with GDP growth struggling to get above 1% this year and next, the prospect is that the Treasury will see the overall debt-to-GDP level edge closer to 90%.

But he said borrowing for the current financial year "appears to be on track to come in at about £50bn, clearly below the OBR's [Office for Budget Responsibility] March forecast". "We doubt the chancellor will ease the fiscal consolidation significantly in the budget on November 22".

This represents an increase of £42.2 billion (or a decrease of 0.5 percentage points as a ratio of GDP) on August 2016.



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