The borrowing for 2017/18 was £40.5 Billion. This was again substantially lower than the OBR (Office for Budget Responsibility) forecast even in March.
The OBR’s inability to predict a deficit accurately even 11 months into a year might be seen as somewhat unsettling were it not for the fact that again the news is better than they had predicted.
The effect on the current tax and spending debate is more difficult to ascertain. Looking purely at these figures, the fiscal position is undoubtedly encouraging.
The Government should have ample headroom to both cut taxes and increase public spending without breaking its self-imposed rules. The difficulty is of course that some politicians and health professionals are looking for a very substantial increase in health spending as well as defence spending.
The Government has hit its target for covering all day-to-day expenditure from revenue, albeit two years late, its borrowing consists now of only borrowing for capital expenditure. But there is still a target of an absolute surplus so that tax revenues cover investment as well.
At the current rate of improvement in the public finances, this should be achievable in the early 2020s but the success of this target depends very much on what is agreed on health spending.
With NICs once again being looked at as a potential target for squeezing more revenues, changes in 2019 in this area cannot be ruled out.
