Britain’s public-sector borrowing was at its lowest level since before the financial crisis during the fiscal year April 2017 to March 2018, figures have shown.
Excluding the finances of the bailed-out banks, public sector net borrowing was £39.4 billion, £6.3 billion less than in the financial year April 2016 to March 2017. This is £5.8 billion less than had been forecast by the independent fiscal watchdog the Office for Budget Responsibility.
The improvement has continued in to the current year, with public sector net borrowing in June falling to £5.4 billion, £0.8 billion less than in June 2017 and the lowest June figure for net borrowing since 2016.
Stock of debt still high
In the current financial year to date – April 2018 to June 2018 – borrowing has been £5.4 billion less than during the same period in 2017, at £16.8 billion, the lowest April-June net borrowing figure since 2007, the eve of the financial crisis.
While the figure was £33 billion higher than in June last year, it was one percentage point lower as a ratio of GDP because the economy has grown by more than the debt.
But if the emergency lending scheme run by the Bank of England to stimulate the economy in the wake of the financial crisis is taken out of the figures, the total stock of debt falls to £1,600.6 billion, equivalent to 76.1% of GDP and £23.7 billion lower than in June last year.
As a ratio of GDP, this figure would be 3.5 percentage points lower than in June 2017.
The Bank of England’s lending is due to be repaid this year.
Money earmarked for health
Despite the improvements, the figures had a mixed reception among analysts, some of whom had expected a somewhat steeper drop in the deficit in June. In addition, some observers pointed out that tax receipts remained sluggish.
The recession of the early Nineties saw borrowing rise again but the public finances remained on an even keel until the expansion of public spending on health and education in the years after the Millennium left them ill-prepared for the financial crisis.
These figures will have been welcomed by Philip Hammond, the Chancellor, as they give him some manoeuvring room ahead of his Budget in the Autumn. However, he has been partly hemmed in by the Government’s pledge to find £20 billion extra for public healthcare over the next five years.