UK government borrowing falls in November

Public sector borrowing fell to £8.7bn in November, down £0.2bn from year earlier, partly thanks to higher income tax receipts, official figures show.

The figure leaves borrowing for the financial year to date at £48.1bn.

That is the lowest recorded at this time of the year since 2007, before the financial crisis.

Last month, the government's independent budget watchdog said it expected borrowing would total £49.9bn for the financial year to March 2018.

January typically brings a big surplus in the public finances thanks to annual income tax payments.

The Office for National Statistics figures showed that revenues from income and capital gains tax were up 6.2% in November from a year ago, and are now 3.4% higher for the year to date. Corporation tax revenues are unchanged.

Tax and spending

On Wednesday, the International Monetary Fund produced its latest review of the UK economy.

As well as downgrading its forecast for UK growth, from 1.7% to 1.6%, the IMF said the Chancellor, Phillip Hammond, should control public borrowing more tightly in order to have room to increase spending should the economy slow too much.

IMF downgrades UK growth forecast on Brexit uncertainty
The IMF's managing director, Christine Lagarde, said the government had gone about as far as it could with cutting public spending and should now look at raising taxes.

Mr Hammond plans to have eliminated public borrowing by some time in the middle of the next decade.

An HM Treasury spokesperson said: "This is the best year-to-date borrowing in a decade, but there is still further to go to repair the public finances.

"We continue to build an economy fit for the future by taking a balanced approach, getting debt falling while investing in our vital public services and keeping taxes low."

John Hawksworth, chief economist at PwC, suggested the chancellor should ease back on the goal of cutting debt: "The deficit is no longer at the dangerous levels reached immediately after the financial crisis, so the chancellor can afford to take his time in making further progress towards his long-term objective of budget balance.

"For the moment, the greater priority is to provide short-term support to the economy during the Brexit process and to fund much needed investment in housing, transport infrastructure and the NHS."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The chancellor can go on his Christmas vacation content that the public finances have weathered the economy's slowdown well this year.

"But, with slow growth likely to persist next year and little margin for error now left to meet fiscal rules, it's unlikely that the chancellor will be able to soften his fiscal plans materially further again."

The ONS said total public sector net debt, excluding public sector banks, stood at £1.73 trillion at the end of November, equivalent to 84.6% of gross domestic product (GDP).

The figure was down by £65.5bn from the previous month as a result of a change in the way Housing Associations are categorised. Their debt is no longer viewed as belonging to the public sector.

The total debt figure is skewed by the Bank of England and its quantitative easing programme. This has involved massive purchases of government bonds which have been taken on to the government books and now count as part of the overall debt figure.

If these are taken out of the calculations, then net debt stands at £1.57tn, equivalent to 76.7% of GDP