UK Government Borrowing Falls Notably
The Pound rose one-tenth of a percent versus the Dollar on Tuesday following the release of UK borrowing data which showed the government borrowing less than it had done in 2016.
“Public sector net borrowing (excluding public sector banks) decreased by £13.6 billion to £49.3 billion in the current financial year-to-date (April 2016 to January 2017), compared with the same period in the previous financial year; this is the lowest year-to-date borrowing since the financial year-to-date ending January 2008,” said the report from the Office of National Statistics.
The Pound rose by one-tenth of a cent from 1.2420 to 1.2430 following the release which indicates the government is exercising a healthy dose of fiscal discipline.
Nevertheless, despite this thrift the national debt continues to rise – just at a slower pace. It stood at 1,682.2bn at the end of January 2017, which is 80.7% of GDP, up by 43.6bn since Jan 2016.
Growth is outstripping debt accumulation, though, with the percentage of GDP figure down from 81.3% recorded in January 2016.
The decline of -9.3bn in net public debt since December was not as low as the -14bn consensus forecast, but it was an improvement on the 4bn rise in debt in December.
The forecasting miss was attributed to changes in the way the ONS compile the data as they now spread out Corporation Tax receipts on a monthly basis rather than quarterly when they come in as was previously the case.
“Admittedly, borrowing on the PSNB ex measure of -£9.4bn was well above the consensus expectation of -£14.0bn in January. But the weak result was mainly due to a change in the way that the ONS measures corporation tax revenue – the quarterly payments are now spread out over each month in the quarter, rather than recorded in the month when the payments are made," says Capital Economic’s Scott Bowmen.
Corporation tax revenue was around £6bn lower under this new method than it would have been under the old. This has also resulted in upward revisions to borrowing in January months in the past, as this is when the third of four corporation tax payments are made,.
Thus the figures were seen as even better than they appeared on the surface.
Bowman notes that borrowing has fallen on the back of strong tax receipts.
“This fall in borrowing was driven by strong receipts growth, with an annual rate of 5%. Granted, this was partly due to strong self-assessment receipts as a result of forestalling ahead of the rise in dividend tax in April 2016. But, looking through some of the monthly volatility, receipts growth has been fairly steady since June – adding to the evidence that the economy has held up well following the vote to leave the EU. Offsetting the strong receipts was annual spending growth of 5%,” commented Bowman.
Overall borrowing has fallen 22% in the year since January 2016, the analyst said, which is much better than the 10% cut forecast by the Office of Budgetary Reasonability.
