Government borrowing reaches its lowest August level in a decade

22 Sep 17

Government borrowing reached its lowest August level in a decade, according to official figures.

Yesterday’s public sector borrowing figures showed a decrease of £1.3bn to £5.7bn in August 2017, compared with August 2016; this is the lowest August net borrowing since 2007.

The data from the Office for National Statistics indicated public sector net borrowing [excluding public sector banks] decreased by £0.2bn to £28.3bn in the current financial year-to-date compared with the same period in 2016 - this too is the lowest year-to-date net borrowing since 2007.

Meanwhile the UK’s net debt rose to £1.77tn at the end of August, up £151bn on last year, and equivalent to 88% of GDP.

It follows last month’s report on public finances, which showed that the government made a surplus in July.

John Hawksworth PwC chief economist noted the Office for Budget Responsibility had forecast the budget deficit would rise to around £58bn this year, but the latest data suggests it may be similar to the £46bn outturn for 2016/17.

He said this would indicate a budget deficit of just over 2% of GDP this year, which is close to the chancellor’s medium term target for the deficit in 2020.

“All of this suggests that the chancellor should have room for some easing of austerity in his budget in November,” he said. The Budget is set for 22 November this year. 

He added: “This could involve extra money for priorities such as the NHS, social care, housing and infrastructure investment as well as some further relaxation of the public sector pay cap.”

Sumita Shah, the Institute of Chartered Accountants in England and Wales’ public policy manager, said: “The fact that the government ran the first July budget surplus in more than a decade shouldn’t distract from the bigger picture.

"We continue to spend more than we raise, and borrow more.

“The truth is, that average net national debt is expected to grow to just under £2tn in the next five years. Put into perspective, £2tnn has 12 zeroes; this is an enormous public liability.  Monthly reporting simply blurs this fact into confusion.”

She urged the chancellor to focus on long-term strategies to bring public finances back into the black.

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