UK government borrowing falls more than expected

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Public sector borrowing fell to £5bn in May, down £2bn from a year earlier, official figures show.

The fall was bigger than expected and brings borrowing for the financial year to date to £11.8bn, £4.1bn less than in the same period in 2017.

At the same time, the Office for National Statistics (ONS) revised down its figure for government borrowing in 2017-18 to £39.5bn.

The total was the lowest annual level of borrowing in 11 years.

The figures come as Chancellor Philip Hammond prepares to reaffirm his promise to reduce public debt, despite Prime Minister Theresa May’s promise of increased spending on the NHS.

In a speech later on Thursday, Mr Hammond will say that taxes must rise, although increases will be implemented in a “fair and balanced way”.

Public sector net debt, excluding public sector banks, was £1,781.4bn at the end of last month, equivalent to 85% of GDP, the ONS said.

That is £44.7bn higher than a year earlier, but 0.4 percentage points lower as a percentage of GDP.

“May’s public finances figures not only confirmed that the new fiscal year got off to a good start, but revealed that borrowing in 2017-18 was also a little lower than previously thought,” said Andrew Wishart, UK economist at Capital Economics.

“It’s early days yet, but if this is sustained, borrowing would undershoot the [Office for Budget Responsibility’s] 2018-19 forecast by £9bn or so over the year as a whole.

“What’s more, if the economy holds up as we expect, borrowing is likely to undershoot the OBR’s forecast by a more significant margin in subsequent years.

“This would allow the chancellor to deliver the recently promised £15bn increase in health spending over the next five years while still meeting his fiscal target.”

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