UK public sector borrowing exceeds forecasts in January

The public sector borrowing was in surplus at the start of 2020 as is usual due to the timing of tax receipts for personal income and capital gains taxes.

According to the Office for National Statistics, pubic sector net borrowing was -£9.8bn in January, which was £2.1bn less than in the same period on year ago.

Samuel Tombs at Pantheon Macroeconomics attributed the lower surplus to the new funding in place for NHS and the timing of contributions to the EU budget; however, he said that the latter did not reflect a "fundamental" increase in the UK's contributions.

Year-to-date PSNB was at £44.8bn or £5.8bn above the comparable period of the previous financial year, ONS said.

And as a percentage of gross domestic product, public sector net debt excluding public sector banks was at £1,798.7bn or 79.6% of GDP, against 80.3% of GDP in January 2019.

According to Tombs, based on current trends, borrowings for the financial year ending in March remained on track to undershoot the Office for Budget Responsibility's revised forecasts.

That was thanks to a combination of weaker-than-expected growth in government outlays, "much lower-than-expected" debt interest payments and a slightly better-than-expected tax take for the central government.

Looking ahead, Tombs was expecting the new Chancellor, Rishi Sunak, to aim for a rise in public borrowing in 2020/21 to 2.4% of GDP from 2.0% in 2019/20, but keep most of his fiscal firepower in reserve for 2021/22, when the economy "will be struggling to adjust to the realities of Brexit".