Britain’s budget deficit narrows

Bloomberg

Britain’s budget deficit narrowed in December as tax
revenue jumped, putting Chancellor of the Exchequer Philip Hammond on course to meet his new fiscal forecasts.
Net borrowing was 6.9 billion pounds compared with 7.2 billion pounds a year earlier, the Office for National Statistics on Tuesday. It left the shortfall in the first nine months of 2016-17 at 63.8 billion pounds, down 14 percent. The improvement reflected higher tax receipts, which rose 5.6 percent. Income tax, corporation tax and stamp duty on property purchases showed the strongest gains. Government spending was little changed.
The decision to leave the European Union is expected to take a heavy toll on the public finances over the coming years. Officials now see the deficit in the current fiscal year coming in at 68.2 billion pounds, or 3.5 percent of economic output. Much will depend on January, the biggest tax month of the year. Forestalling ahead of a dividend-tax increase that took effect in April last year is expected to boost self-assessed income-tax revenue. That should help to offset weaker stamp-duty receipts caused by a downturn in the London housing market since the Brexit referendum.
Pressure on the public finances is also coming from debt-interest, as accelerating inflation pushes up the cost of servicing index-linked gilts. Debt payments in the first nine months of the fiscal year were up almost 7 percent on the year. That could force the Treasury to sell more bonds than planned. Central-government cash borrowing stood at 84.3 billion pounds between April and December, leaving the government little room to meet its full-year forecast of 85.7 billion pounds.