Belfast Telegraph

Boost for Chancellor with fall in Government borrowing

The Government borrowed its lowest amount in February for 10 years, giving the Chancellor a boost in his quest to shore up the public finances.

The Office for National Statistics (ONS) said public sector net borrowing excluding state-owned banks fell by £2.8 billion to £1.8 billion last month.

It came in lower than the expectations of economists who had pencilled in a larger figure of £3.1 billion.

Government borrowing, excluding banks, for the financial year to date, April to February, dropped by £19.9 billion to £47.8 billion, in contrast to the same period last year.

The ONS said it was the lowest year-to-date borrowing figure since February 2008.

The Office for Budget Responsibility (OBR), the Government's fiscal referee, said in the spring Budget that it expects Chancellor Philip Hammond to undershoot previous borrowing targets for this financial year, revising its outlook from £68.2 billion to £51.7 billion.

Mr Hammond has 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 said earlier this month 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 £48.1 billion to £1,591.6 billion last month, equivalent to 85.4% of gross domestic product (GDP).

A spokesman for the Treasury said: "A strong economy and sustainable public finances are vital to achieve rising living standards.

"The spring Budget set out plans to build a stronger, fairer economy by investing in skills, schools, social care and cutting-edge technology, while continuing to bring down the deficit and live within our means.

"The Government appreciates that families are concerned about the cost of living, and that is why we are cutting tax for millions of working people, increasing the National Living Wage to £7.50 per hour from next month, and freezing fuel duty for the seventh year in a row."

The Government's coffers were boosted by a 7% rise in tax receipts to £59.3 billion last month, up from £55.3 billion for February 2016.

Corporation tax rose by £700 million to £4.6 billion over the period, while income tax lifted by £2.3 billion to £19.6 billion.

It also raked in more money from National Insurance contributions, which were £700 million higher at £10.7 billion.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the run of low public borrowing figures was "not a signal that the economy is performing well" in 2017.

"True, tax receipts were 7.1%, or £3.9 billion, higher in February than they were a year ago. But this reflected strong growth in taxes payable for liabilities generated in the 2015/16 fiscal year.

"Borrowing will total £50.8 billion this fiscal year - nearly £1 billion below the OBR March Budget forecast - if the trend seen in the first 11 months is maintained in March. The trend, however, likely will deteriorate in March."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Some much-needed good news for Chancellor Philip Hammond as the February public finance data (and an upwardly revised January surplus) put him on track to meet the markedly lowered 2016/17 fiscal target contained in March's Budget.

"This is a particular relief for the Chancellor as he has been under pressure after swiftly and embarrassingly scrapping his Budget plans to raise National Insurance contributions for the self-employed.

"Mr Hammond is clearly keen to keep fiscal ammunition up his sleeve - due to the major uncertainties and downside risks that the economy faces as it navigates its way out of the EU.

"Despite the resilience of the economy so far since last June's Brexit vote, the Chancellor is very well aware that a challenging road lies ahead."