Every month this financial year, borrowing has fallen short of official forecasts. Photo: Aaron Chown/PA
Jeremy Hunt has 'wiggle room' for pre-election tax cuts after the government borrowed almost £20bn less than official forecasts.
Higher tax receipts and lower interest payments on debt contributed to the windfall as government borrowing stood at £14.3 billion in September, according to the Office for National Statistics (ONS).
That's £4 billion less than economists had forecast, meaning borrowing fell short of official forecasts in every month this financial year.
Overall, the UK borrowed £19.8 billion less than expected in 2023.
September's growth was helped by a 7% rise in tax revenues from a year earlier, including increases in income taxes and VAT.
Corporate tax receipts jumped as large companies paid their tax bills.
Interest payments on debt also fell sharply amid slower price growth, although high inflation is expected to remain high debt service costs for some countries. years.
The September deficit means the Government has borrowed £81.7bn this financial year to plug the gap between tax receipts and government spending.
This is far less than the £101.5bn the Office has provided budgetary responsibility (OBR). ), the independent tax watchdog, predicted just six months ago.
These figures will force the chancellor to announce tax cuts before the next election.
Mr Hunt has already done so ruled out tax cuts in next month's fall statement, warning instead of “tough decisions” on spending.
However Ashley Webb of Capital Economics said the borrowing figures brought some comfort to Downing Street after two crushing by-election defeats, adding that the economy remained “buoyant”.
Mr Webb said: “Although The Chancellor ruled out tax cuts in his autumn statement, we still expect him to have some wiggle room for tax cuts and spending increases in the March Budget.”
Elizabeth Martins, senior economist at HSBC, agreed that “better financial news could make way for tax cuts in the spring.”
She said: “A little more fiscal space, as well as lower inflation and stable markets, could allow this to happen, even if it raises some eyebrows given the [higher debt].”
Mr Hunt said he was focused on reducing Britain's debt, which is almost the size of the British economy and accounts for about 97.8% of gross domestic product (GDP). This is close to levels last seen in the early 1960s.
“We need to see debt reduced and public sector waste reduced so that those delivering public services can get back to doing what they do best; educate our children, keep us safe and treat us when we are sick,” Mr Hunt said.
OBR is likely to sharply lower its short-term growth forecasts when it delivers its latest forecasts on November 22. Back in March, they predicted the economy would grow 1.8% in 2024. Most economists believe the economy will grow by less than 1%. next year.
But tax revenues remain high amid a series of levy hikes and undercover raids that will force tens of millions of workers to hand over more of their pay to tax collectors amid higher inflation.
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Corporate tax, which Mr Hunt raised from 19% to 25% in April this year, is the Treasury's fourth largest source of income, and receipts have consistently exceeded official forecasts.
OBR said this week there is “no sign” that strong receipts are starting to decline and are expected to revise their forecasts next month.
Inheritance tax receipts also rose by £400 million this year to £3.9 billion. Tory MPs want Mr Hunt to cut the tax before the next election and commit to scrapping it entirely in the next parliament.
The ONS also said the government has transferred £24.1 billion this financial year sterling into the budget to cover losses caused by the active purchase of bonds by the Bank of England during the financial crisis and pandemic.
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