LONDON: Britain’s budget deficit narrowed in December as tax revenue jumped, putting Chancellor of the Exchequer Philip Hammond (pic) on course to meet his new fiscal forecasts. Net borrowing was £6.9bil compared with £7.2bil a year earlier, the Office for National Statistics said yesterday. It left the shortfall in the first nine months of 2016-17 at £63.8bil, down 14%. The improvement reflected higher tax receipts, which rose 5.6%. Income tax, corporation tax and stamp duty on property purchase 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 £68.2bil, or 3.5% 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% on the year. That could force the Treasury to sell more bonds than planned. Central-government cash borrowing stood at £84.3bil between April and December, leaving the government little room to meet its full-year forecast of £85.7bil. The total cash deficit surged to £36.3bil, the highest since 2008. The increase reflected higher borrowing by the Bank of England to finance its asset-purchase program, which it restarted last year. Net debt climbed to £1.7 trillion, or 86.2% of GDP.
