Government borrowing lowest for 17 years

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Government borrowing last year fell to its lowest annual level in 17 years, official figures show.

Borrowing for the 2018-19 financial year was £24.7bn, £17.2bn less than in the previous financial year, the Office for National Statistics said.

Despite the drop, the amount was still higher than the Office for Budget Responsibility’s forecast last month.

Economists believe the reduction should give the Chancellor freedom to ease the austerity measures of the last decade.

The figures showed tax receipts continued to grow strongly in March, but higher government spending accounted for the wider-than-expected deficit, mostly down to the purchases of goods and services.

Chancellor Philip Hammond speaking to the Treasury Select Committee on Wednesday reiterated that by the financial year 2020/21 the government would have around of £27bn “headroom” to use on a range of options.

But he added: “Until we have resolved the Brexit issue I don’t think it makes sense to to plump for one option or another and rule out our optionality.”

Samuel Tombs, UK economist of Pantheon Macroeconomics, explained that the chancellor had set a borrowing target equivalent to 2% of GDP. Borrowing last year was equivalent to 1.2% of GDP, down from 10% at the height of the financial crisis, giving the chancellor some extra spending room.

Mr Tombs said: “The chancellor still should be able to scrap the further austerity measures planned for 2020/21 in the Budget later this year and meet his target.”



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