© Bloomberg

New figures for UK government borrowing show it is on course to meet the latest forecast set out by the Office for Budget Responsibility in the Budget on March 8.

According to the Office for National Statistics, the government borrowed £1.8bn in February, taking the total for the first 11 months of the financial year to £47.8bn. The monthly figure was slightly below the consensus forecast of £2.1bn.

Between April 2016 and February 2017, the government borrowed 29 per cent less than during the same period in 2015-16, a bigger fall than the OBR predicted for the year as a whole.

In March, the OBR cut its forecast for borrowing this year from £68.2bn to £51.7bn, because of higher than expected tax receipts and a delay to some spending, which has been pushed into next year.

So far this year, central government revenues have grown by 6.2 per cent compared with a year earlier, while day-to-day spending has grown by 1.3 per cent. To meet the OBR forecast, over the year as a whole revenues need to grow by 6 per cent and current spending can grow by up to 1.8 per cent.

However, Samuel Tombs of Pantheon Macroeconomics, warned: “The trend . . . likely will deteriorate in March.”

He said that self-assessment income tax receipts, which were strong in January and February, “usually are modest in March. In addition, interest payments on the stock of index-linked debt that are always made in March will be significantly higher than a year ago, because of the rise in RPI inflation.”

There has been particularly rapid growth in corporation tax receipts, which were 21 per cent higher between April 2016 and February 2017 than during the same period in 2015-16.

This is partly because of higher company profits: according to ONS data, they increased by 10 per cent in 2016. Tax receipts have also been higher because reforms have restricted the ability of banks to offset taxable profits with trading losses.

One-off factors have also reduced borrowing, including people taking dividend income early to avoid a tax rise last April. As a result, borrowing is forecast to rise slightly next year. The OBR predicts that borrowing will rise from £51.7bn in 2016/17 to £58.3bn in 2017/18.

Get alerts on UK public finances when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article