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Boost for Chancellor as borrowing undershoots target

The ONS said overall public sector net borrowing fell £3.5 billion to £42.6 billion in the fiscal year after the lowest March borrowing since 2004.

Chancellor Philip Hammond has beaten his full-year budget deficit target after borrowing fell sharply in March as official figures also revealed the first surplus on day-to-day government spending for 16 years.

The Office for National Statistics (ONS) said overall public sector net borrowing (excluding public sector banks) fell £3.5 billion to £42.6 billion in the fiscal year after the lowest March borrowing for 14 years.

The full-year figure was the lowest since 2006-07 and was also below the £45.2 billion predicted by the UK’s fiscal watchdog, the Office for Budget Responsibility (OBR).

It comes after borrowing fell £800 million year on year to £1.3 billion in March – the lowest borrowing for the month since 2004.

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The ONS data also showed a £112 million surplus in 2017-18 on the UK’s current budget, which measures day-to-day spending by the Government – the first surplus since 2001-02.

Mr Hammond cheered the lower-than-expected borrowing figures.

He said: “Thanks to the hard work of the British people, borrowing is the lowest in over a decade.

“Our economy is at a turning point with debt starting to fall and people’s wages rising, as we build an economy that truly works for everyone.”

Mr Hammond has set a goal to eliminate the budget deficit in the next few years.

He also wants to cut debt as a share of gross domestic product (GDP) each year from 2018-19.

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The latest ONS figures showed overall public debt stood at 86.3% of GDP, up from 85.3% of GDP in the previous financial year.

But it is being pushed higher by the temporary effect of the Bank of England’s lending scheme launched following the Brexit vote.

Stripping this out, net debt as a share of GDP is already falling.

John Hawksworth, chief economist at PwC, said: “The deficit is now down to only around 2% of GDP, slightly lower than it was just before the financial crisis – for the first time since 2002, the Chancellor is meeting Gordon Brown’s old Golden Rule of borrowing only to invest, albeit only by a wafer thin margin of £0.1 billion that could easily be revised away as the ONS refines its preliminary estimates.”

He added: “The Chancellor will want to build up a larger comfort margin than this in future years, but it is clear that the repair job on the public finances begun by George Osborne in 2010 is now well on the way to completion.”

But Samuel Tombs at Pantheon Macroeconomics said: “Rapidly falling public borrowing continues to reflect sharp falls in spending, rather than a reviving economy.”

The ONS figures showed a 6.1% rise in revenues from income tax and capital gains year-on-year last month, with corporation tax revenues up 2.2%.

Rising inflation saw the Government’s debt interest payments rise more than 12% over the year to March 31, but fall 75% in March.

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