ONS data shows that the government borrowed £5.9 billion in September, bringing the deficit in this fiscal year to £32.5 billion. From Laith Khalaf, Senior Analyst, Hargreaves Lansdown.
While the country is still spending beyond its means, the deficit is heading in the right direction, falling £2.5 billion compared to last year. Better still, that’s against a prediction from the OBR that borrowing would rise to £58.3 billion this financial year, from £45.7 billion last year.
Overall public sector net debt nudged up to £1,785.3 billion, or 87.2% of GDP.
‘The deficit is heading in the right direction, helped by increasing revenues from income tax, national insurance and VAT, which underlines how reliant government finances are on UK consumers both earning money, and spending it. Given record low unemployment and surprisingly robust retail sales, it’s not hard to see why the Treasury is making inroads on bringing its borrowing back in line.
Despite the improving fiscal outlook, we can’t expect too many giveaways in the forthcoming Budget. While the deficit is falling, the government still owes an eye-watering amount of money, even though low interest rates have helped to reduce the cost of servicing that debt. Given the hawkish rhetoric coming out of the Bank of England, that may be about to change.
What’s more, the imaginary pie of future tax revenues that the Chancellor has to play with is expected to be trimmed back significantly, thanks to an adjustment to economic projections made by the Office for Budget Responsibility. Finally there’s also Brexit in the mix, and the unknown effect this will have on the UK economy, and government finances. All of this means the Chancellor’s spreadsheets will tell him he doesn’t have a great deal of room for manoeuvre on Budget day.’
