Stronger growth is boosting tax receipts and putting the Treasury on course to undershoot official borrowing targets by as much as £10bn this year, official figures suggested yesterday.
Public sector borrowing of £11.1bn in September was £1bn below a year earlier and means the underlying deficit for the first half of the financial year so far stands at £56.7bn, nearly 10 per cent lower than 12 months earlier.
This puts the Chancellor on track to best the Office for Budget Responsibility’s £119.8bn borrowing forecasts for the current financial year, due to be updated in December’s Autumn Statement, reflecting far stronger growth for the economy so far this year.
Martin Beck at the research firm Capital Economics, said “the public finances are now beginning to reap the rewards of a stronger economy”, as the figures showed total current receipts of £281.5bn for the year to date, compared with £260bn last year.
As well as a healthier jobs market, with employment rising to a new record high of nearly 30 million, the Government’s coffers are likely to have been swelled by higher stamp duty revenues, fuelled by initiatives to improve mortgage credit and the Help to Buy scheme to support the housing market.
Rob Wood, the chief UK economist at investment bank Berenberg, said: “Strengthening growth, rising employment and a sharply improving housing market mean there is a decent chance that the fiscal deficit will undershoot official forecasts this year and next, probably by £5bn to £10bn – albeit we can’t get the bunting out just yet because there is still a long way to go. The deficit is still huge, heading for over £100bn again this year.”
The UK’s total debt pile grew to £1.21 trillion, although the first sale of the taxpayer stake in Lloyds Banking Group made a £600m pinprick in the mountain.
Official GDP estimates due on Friday are set to show 0.8 per cent growth over the quarter, the fastest since 2010. The Bank of England’s deputy governor, Charlie Bean, added to the cheer as he said “there are at last signs that a recovery may be gaining traction”. He added that banks were “well placed” to provide the credit to support a recovery, although policymakers remain vigilant over the housing market.