U.K. public sector borrowing rises in December

The U.K. public finances latest report was released. It indicated that public sector borrowing rose GBP 3 billion in December, disappointing expectations of a more modest rise. This was about GBP 0.3 billion worse than the same month one year ago, noted Lloyds Bank in a research report. Nevertheless, detail implies that most of the overshoot in borrowing showed changes in the U.K.’s net contribution to the EU budget.

In December 2017, the U.K. received a rebate of GBP 1.2 billion, whereas last December saw the U.K. make a modest payment of GBP 0.3 billion, implying a GBP 1.5 billion rise in the net contribution. This implies that the fall in December public finances was driven by erratic factors rather than being an indication of the underlying health of the U.K. economy.

However, after the rise in December, cumulative borrowing in the current fiscal year stands at GBP 35.8 billion. While that is still about GBP 13 billion below the same point in the earlier fiscal year, it is just over GBP 10 billion above the full-year target of GBP 25.5 billion set by the Office for Budget Responsibility in October.

“For context, the public finances between January and March in fiscal year 2017/18 recorded a net repayment of £7.1bn. Clearly, therefore a strong number for self-assessment tax receipts is needed to generate a sufficient surplus in January, if the 2018/19 target is going to be met”, added Lloyds Bank.

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