Chancellor on track to reach budget deficit target, public finances data reveals

UK public finances improved modestly in December compared to a year earlier, putting Chancellor Phillip Hammond on track to reach his budget deficit target for the current financial year.

Public sector borrowing, excluding banks, in December dropped 5% year-on-year to £6.9bn, ahead of expectations of £6.7bn, the Office for National Statics revealed. November’s shortfall was also revised down to £11.3bn from a previously reported £12.6bn.

Borrowing in the first nine months of the 2016/17 tax year declined 14.3% to £63.8bn compared to a year ago.

At the Autumn Statement in November, Hammond said his goal is to cut the 2016/17 budget deficit by 10% to £68.2bn, taking into account the uncertainties surrounding the UK’s exit from the European Union. The target would still leave Britain with one of biggest shortfalls among the world's industrialised nations at about 3.5% of economic output.

Howard Archer, chief UK and European economist at IHS Global Insight, said based on the figures in the first nine months, borrowing looks set to reach £64.6bn in the current fiscal year.

“For now at least, the Chancellor looks solidly on course to - at the very least - hit the 2016/17 budget deficit target contained in November’s Autumn Statement,” he said.

“Indeed, there currently looks to be a very real chance that the public finances could undershoot the revised target for 2016/17. However, the budget deficit will still be appreciably higher than had originally been targeted in the March 2016 budget.”