Government borrowing falls to lowest since financial crisis
Public borrowing in the first two months of the financial year fell to the lowest level since 2007 as the government received more in tax revenue.
Britain borrowed £11.8bn in April and May – £.41bn less than a year earlier and the best start to a financial year since shortly before the financial crisis started.
Office for National Statistics figures showed the government borrowed £5bn in May – about £2bn less than a year ago and the lowest figure in May since 2005. Economists on average had expected borrowing of £6.3bn.
In April and May the government spent £123.6bn, roughly the same as a year earlier. The government’s income increased 3% to £112.9bn including £82.6bn in taxes.
Pantheon Macroeconomics warned that the rate of improvement in the public finances would not hold up. May’s figure includes a £1.1bn decline in interest payments, which were unusually high in 2017, and a £0.4bn fall in central government net investment. The 3% increase in tax receipts is less than the 3.6% full-year increase penciled in by the Office for Budget Responsibility, he added.
Samuel Tombs, Pantheon’s chief UK economist, said: “The headline borrowing figures look fantastic, though this rapid rate of improvement won’t be sustained.”
Tombs said Philip Hammond, the chancellor, would have room to ease the fiscal squeeze at his November budget but that most of any extra borrowing would probably go to the NHS after Theresa May announced increased funding for the health service. Hammond is giving a speech to a City audience at Mansion House in London on 21 June.