An £11.6bn VAT windfall in August helped drive government borrowing down to its lowest August level since 2007, according to data released today.
This morning’s figures from the Office for National Statistics (ONS) show that the deficit narrowed to £5.7bn last month, compared with £7bn a year earlier. That was due to a 5.6% rise in VAT receipts to hit a record August total of £11.6bn, ONS said.
Commenting on the public finance data, John Hawksworth, PwC chief economist, said:
"Today's public finance data brought some good news for the Chancellor as public borrowing in August fell to its lowest level in that month since August 2007.
“For the first five months of this financial year, overall public borrowing has been broadly in line with last year's levels and the composition of the deficit has been more favourable.
“The gap between government revenues and current spending has fallen relative to last year as central government receipts have risen by 4% whereas current spending is only up by around 3%. This has been offset by higher public investment than last year, but this is a good thing in supporting economic growth.
“Back in March, the Office for Budget responsibility (OBR) forecast that the budget deficit would rise to around £58 billion this year, but the latest data suggest that it may end up broadly similar to the £46 billion outturn for 2016/17. This would imply a budget deficit of just over 2% of GDP this year, which is already close to the Chancellor's 2020 medium term target.
“All of this suggests that the Chancellor should have room for some easing of austerity in his Budget in November. 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."