UK government borrows less than expected in December

The UK government borrowed much less than expected last month, according to data released on Tuesday by the Office for National Statistics.

Public sector borrowing, excluding banks, rose £7.8bn in December, which was below the £14.1bn economists were expecting.

It was also £8.4bn below the amount borrowed a year earlier and marked the lowest borrowing for the month of December since 2019.

For the nine months to December, total public sector net borrowing came in at £119.1bn, which was £5bn below the £124.1bn forecast by the Office for Budget Responsibility.

Ruth Gregory, deputy chief UK economist at Capital Economics, said: "After nine months of the 2023/24 fiscal year, borrowing is on track to undershoot the OBR’s full-year borrowing forecast of £123.9bn by £5.0bn.

"What’s more, with market interest rate expectations and long-dated gilt yields having fallen since November, we suspect the OBR will revise down its borrowing forecast significantly from 2025/26.

"That may provide the Chancellor with ‘headroom’ against his fiscal mandate of about £20bn in the Budget. That will probably allow him to unveil a freeze in fuel duty in April 2024 (costing about £6.0bn a year) but perhaps also to announce more crowd-pleasing measures, such as a 1p cut to income tax (costing £6.9bn a year), while still maintaining fiscally prudent appearances."