UK borrowing up but gives Hunt room for tax policy changes
UK public borrowing came in less than expected in the first seven months of the financial year, according to official data published on Tuesday, a day ahead of finance minister Jeremy Hunt's autumn budget.
Government borrowing between April and October was £98.3bn, the Office for National Statistics (ONS) said, £22bn higher than a year ago but almost £17bn less than forecast by the Office for Budget Responsibility (OBR) in March.
The figures will heighten calls for Hunt to ease the tax burden on families, especially as decisions taken by he and Prime Minister Rishi Sunak to freeze income tax thresholds have pulled millions of people into higher tax brackets - a stealth measure known as fiscal drag.
Freezing the thresholds, combined with soaring inflation, means that rather than raising £8bn over four years as first expected by the Treasury, the six-year freeze is now also on track to raise about £54bn by 2027-28.
UK public sector net borrowing excluding banks was £14.9bn in October, the second-highest level of borrowing for the month since records began in 1993. It was also higher than consensus forecasts and the OBR's March estimate of £13.7bn.
Tax receipts were £2.7 billion higher year on year at £57.9bn.
"Although borrowing in October was only £3bn less than in October 2020 at the height of the pandemic when billions were being spent on expensive programmes such as the furlough scheme, the government’s finances are in a much better position than the OBR had predicted earlier this year. This potentially provides some wiggle room for the Chancellor Jeremy Hunt when he makes his announcements tomorrow," said Interactive Investor head of investment Victoria Scholar.
"So far, the government has been trying to stick with fiscal prudence, refraining from tax cuts and spending increases where possible in order to provide a fiscal backdrop that supports that Bank of England’s inflation-combative monetary tightening path."
"But with a General Election looming, the Conservatives struggling in the polls, better-than-expected government finances and Sunak’s year-end target to halve inflation already met, the Chancellor may resort to some vote winning tax cuts in tomorrow’s hotly anticipated Autumn Statement.”
Reporting by Frank Prenesti for Sharecast.com