Government borrowing was higher than expected at £12.6bn in November as the growth in income tax receipts slowed on the previous month.
Official figures showed that income tax receipts increased by only 1.1%, after several years of consistent 3%-plus growth, to prevent the UK’s budget deficit falling at the pace forecast by City analysts.
Economists polled by Reuters had expected borrowing of only £12.1bn.
But the November borrowing figure was lower than last year’s £13.2bn and put the Treasury on course to meet the Office for Budget Responsibility’s revised target for borrowing by the end of the year.
The OBR said in March it expected the budget deficit to fall to £55bn, or more than 20% on the previous year, but said in the autumn statement the fall would be more like 10% to £68bn to take account of the Brexit vote shock, which slowed economic growth and reduced the government’s income.
Howard Archer, an economist at IHS Global Insight, said the modest improvement on last year was “reassuring for the chancellor”.
He said: “This is welcome for Hammond as it would have been somewhat embarrassing if the first set of public finance figures after the November autumn statement had immediately put question marks over his new fiscal targets,” he said.
The Office for National Statistics said that excluding the publicly owned banks, figures for the financial year to date – April to November – showed the deficit fell by £7.7bn to £59.5bn, compared with the same eight months in 2015.
A bigger interest bill on the government’s debts was another burden on the exchequer, but was offset by lower public investment, which limited the outflow of funds from Whitehall.
VAT receipts were up 4.4% year-on-year in November and corporation tax receipts were up 22.9% year-on-year, showing that economic activity remained robust.
A spokesman for the Treasury said: “The government has made significant progress in bringing the public finances under control, but our debt and deficit remain too high.
“That is why the chancellor set out new fiscal rules to return the budget to balance, while creating the space to support the economy and raise productivity through a new £23bn national productivity investment fund.”
Scott Bowman, UK economist at Capital Economics, said: “Looking through some of the monthly volatility, receipts growth has been on a slight upward trend since May – adding to the evidence that the economy has held up well following the vote to leave the EU.
“Meanwhile, an acceleration in annual VAT receipts growth from 3.7% to 4.4% reinforces the recent surveys that imply that consumer spending has been fairly strong at the start of the festive season.
“Accordingly, we think borrowing should come in close to the OBR’s current £68bn forecast for the 2016-17 fiscal year.”
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