British public finances boosted by #EUCredit and surging #VATReceipts

Britain’s budget deficit narrowed by much more than expected last month, helped by an unusually large credit from the European Union and the strongest value-added tax receipts on record, write William Schomberg and David Milliken.

Britain’s economy slowed less last year than most economists had predicted after the Brexit vote in 2016, and tax revenues have largely held up for the government.

Public sector net borrowing, excluding state-owned banks, totalled 2.6 billion pounds last month, almost half the borrowing in December 2016 and way below a median forecast of 5.0bn pounds in a Reuters poll of economists.

The Office for National Statistics said the public finances were helped by a 1.2bn-pound credit from the EU which reflected the bloc’s smaller overall budget and updated economic forecasts for member countries.

Many countries in the EU saw stronger-than-expected economic growth last year, outperforming Britain.

British public borrowing since the start of the financial year in April totalled 50bn pounds, nearly 12% less than in the same period of 2016 and the lowest year-to-date total since 2007, the ONS said.

That leaves Hammond on course to meet his target of 49.9bn pounds in the 12 months to the end of March 2018 - equivalent to 2.4% of gross domestic product - thanks to stronger-than-expected tax revenues.

The ONS said value-added tax receipts were the strongest for any month on record in December, up by an annual 4.9% to 12.3bn pounds.

Share this article: