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  • News Desk
  • Jun 22nd, 2018
  • Comments Off on UK borrowing falls more than expected, Hammond under pressure to spend
Britain's government borrowed less than expected last month, according to official data on Thursday that may cheer finance minister Philip Hammond but also increase pressure on him to spend more after years of deficit reduction. Public sector borrowing fell in May to 5.0 billion pounds ($6.6 billion), compared with 7.0 billion pounds a year ago, the Office for National Statistics (ONS) said, at the bottom end of the range of economists' forecasts in a Reuters poll.

So far this financial year, the deficit totals 11.8 billion pounds, 26 percent less than in April-May 2017, though it is rarely possible to get a good steer on full-year borrowing trends this early in the tax year, which starts in April.

The figures are likely to please Hammond, who in a speech later on Thursday intends to reaffirm his goal of lowering public debt despite a big rise in health spending announced by Prime Minister Theresa May earlier this week.

"If the economy holds up as we expect, borrowing is likely to undershoot the Office for Budget Responsibility's forecast by a more significant margin in subsequent years," Andrew Wishart of consultancy Capital Economics said.

"This would allow the chancellor to deliver the recently promised increase in health spending over the next five years while still meeting his fiscal target."

Last year, British government borrowing totalled 39.5 billion pounds or 1.9 percent of GDP according to Thursday's figures, down from the ONS's estimate last month of a 40.5 billion pound budget deficit, equivalent to 2.0 percent of GDP.

This was the lowest annual budget deficit as a share of GDP since 2001/02 and the borrowing is only for long-term investment, not day-to-day spending.

The deficit stood at 9.9 percent of GDP when finance minister Philip Hammond's predecessor, George Osborne, took power in 2010 in the wake of the global financial crisis and started a multi-year programme of public spending cuts.

Copyright Reuters, 2018


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