UK public finances show first current budget surplus in sixteen years, reports ONS

The current budget deficit for 2017-18 was in surplus for the first time since 2001-02

The UK’s public finances have registered their first current budget surplus in 16 years, showing the progress made by the government on this measure of deficit repair since the last recession.

The Office for National Statistics (ONS) reported on Tuesday that public sector borrowing was just £1.35bn in March, the final month of the 2017-18 fiscal year.

This was lower than the £3.25bn City analysts had expected, and it took full year borrowing to £42.6bn.

This was below the £45.2bn forecast made by the Office for Budget Responsibility (OBR) as recently as March – and was the lowest UK total annual deficit since 2006-07.

And when stripping out capital spending, the “current” budget deficit for 2017-18 was actually in a modest surplus of £112m, the first time this has happened since 2001-02.

First current surplus in 16 years

However, the previous chancellor, George Osborne, had originally planned to reach a surplus on this measure of the deficit in 2014-15, with the delay showing the extent to which the economy and public finances have undershot hopes over the past eight years.

And an overall budget surplus, on current trends, is not expected until late in the next decade, and possibly not until the 2030s.

Total borrowing hit a peak of £153bn in the last recession, and the current budget topped out at £100bn.

Some economists think the better than expected performance of the public finances over the past year could provide scope for the current chancellor, Philip Hammond, to moderate the ongoing spending squeeze in the Autumn Budget.

But the OBR has cautioned that it thinks recent borrowing figures for 2017-18 could be revised up, highlighting particular uncertainty about local authority spending at the moment, which might serve to limit Mr Hammond’s room for manoeuvre.

“The figures typically take some months to settle down and revisions can be significant,” the OBR said on Tuesday in response to the latest data.

A slowdown of the overall economy in 2018 could also take a toll on tax receipts.

“Given the time lags involved, the apparent slowing in the economy so far in 2018 will probably have some adverse impact on the public finances in the coming months,” said Capital Economics.

The ONS will release its preliminary estimate of GDP growth for the first quarter of 2018 on Friday, with analysts expecting the growth rate to be down from the 0.4 per cent recorded at the end of 2017.