Government Borrowing Figures Improve Again

The August borrowing numbers showed a smaller than expected deficit for the month, after July’s surplus. It is a one more small piece of good news for the Chancellor ahead of 22 November and the first Autumn Budget of this millennium.

At the time of the March 2017 Budget, borrowing (PSNB) for 2017/18 was forecast to be £58.3bn, 13% up from its then estimate of £51.7bn for 2016/17. The borrowing figures for August have just been released, giving us a snapshot of the first five months of this financial year. The picture – at this stage – is better than most pundits had predicted.

First off, there has been another revision for the last fiscal year. The latest estimate for 2016/17 PSNB is £45.6bn, a £0.5bn increase on July’s calculation, but still £6.1bn below the OBR’s March 2017 estimate. The 2016/17 deficit estimate had been coming down each month because of recalculations of receipts (generally up) and expenditure (generally down). The latest estimate, reflects small upward revisions to central and local government expenditure according to the OBR commentary on the ONS data.

For now, the OBR is standing by its Budget estimate for 2017/18, as it expects self-assessment receipts to suffer (relatively) in January 2018 because of the surge in January 2017 that stemmed from dividend payments made in 2015/16 to avoid the tax reforms.

The borrowing figures for the month of August alone revealed a deficit of £5.7bn against a deficit of £7.0bn last year and market expectations of a deficit of about the 2016/17 level. Self-assessment receipts were down markedly on a year ago, but this was probably due to calendar factors, as 31 July was a Sunday in 2016, which meant some payments moved into Monday and August. Across July and August, self-assessment receipts rose by 4.4% over 2016/17. The lower August 2017 self-assessment receipts were countered by buoyant PAYE, NICs and VAT income.

For the first five months of 2017/18 PSNB amounted to £28.3bn, down £0.2bn on 2016/17. If the borrowing pattern follows the 2016/17 experience, that suggests an outturn for 2017/18 very similar to 2016/17 at about £45bn. The anticipated fall in self assessment receipts mentioned above means that last year’s pattern will not be repeated. However, five months into the financial year, the overall pattern points to the Chancellor having perhaps £10bn to play with by next March, compared with the original Budget projections.

As we said last month, these borrowing numbers give the Chancellor some wriggle room heading towards his Autumn Budget.