UK chancellor Philip Hammond is on target to meet the government’s budget deficit reduction targets for the current financial year after the Office for National Statistics reported a £10bn surplus last month.
While January is typically a strong month, thanks to a surge of income tax receipts that comes at the start of the calendar year, the surplus was slightly higher than forecast.
With two months remaining in the 2017-18 financial year, the government’s cumulative borrowing now stands at £37.7bn, down £7.2bn or 16% on the same period a year ago.
The Carillion factor
At the time of the Budget last November, independent watchdog the Office for Budget Responsibility (OBR) estimated net borrowing in the full fiscal year would increase by £4.1bn from the previous period, to total £49.9bn.
However, the ONS said that the figure for April 2017 to last month is the lowest year-to-date net borrowing for a decade, although it also cautioned that was “currently investigating the impact of the liquidation of Carillion on the public sector finances, both in relation to the public-private partnership projects in which Carillion was involved and the additional funding that government has provided in order to maintain public services.”
The ONS added that Carillion held around 450 contracts with the government, representing 38% of the company’s 2016 reported revenue. The agency will also consider the findings of the Treasury select committee’s inquiry into student loans, and whether they would have any impact on public sector finances.
“Barring a large deterioration in the final two months of the year, borrowing still looks on course to undershoot the OBR’s full-year forecast – perhaps by as much as £10bn,” said Ruth Gregory of Capital Economics.