The government borrowed less than expected in June, helped by higher tax receipts and a big drop in debt interest payments.
Borrowing - the difference between spending and tax income - fell to £18.5bn, according to the Office for National Statistics (ONS).
It is £400m lower than last June and below predictions by the government's independent forecaster.
But the ONS said borrowing is still the third highest for June on record.
The Office for Budget Responsibility (OBR) had expected public borrowing to reach £21.1bn.
Meanwhile, the ONS said that borrowing for April and May had been revised down by £7bn.
Ruth Gregory, deputy chief UK economist at Capital Economics, said that Chancellor Jeremy Hunt "now looks likely to have a little more wiggle room in the Autumn Statement to fund a few pre-election giveaways".
But she added: "With the full upward impact on borrowing from higher interest rates and weaker GDP growth still coming down the line, we continue to think any package of pre-election net tax cuts will probably need to be modest or swiftly reversed."
Mr Hunt said it was important to "avoid reckless spending".
"Now more than ever we need to maintain discipline with the public finances," he said.
The ONS said that the interest paid on government debt hit £12.5bn, below a record £20bn in June last year but still historically high.
Some of the interest that the government pays on its debt is linked to the Retail Prices Index measure of inflation which remains stubbornly high despite a slowdown in June.
The Bank of England has also been raising its key interest rate since December 2021 to curb rising prices.
Tax receipts were stronger than expected in June, at £77.4bn. This was higher than the OBR forecast and £5.6bn more than the same month last year.
Providing energy bill support was always going to bump-up public spending, while interest payments on the government's debt have increased too due to higher inflation and interest rates.
But bigger tax receipts meant a smaller deficit in June than expected.
Inflation has meant that there is an increasing number facing higher tax bills, given that the threshold at which different rates of income tax apply aren't being raised in line with the cost of living.
Those receipts also reflect a more resilient economy than some reckoned. Separate official figures showed the volume of retail sales rising by 0.7% in June.
Add in some revisions to earlier figures, and three months into the financial year the public finances appear on a better track than the official forecasts - leaving some to query if the chancellor may be able to afford modest pre-election tax cuts and meet his own self imposed rules.
But it is early days.
Persistent inflation and the risk of a slowdown in activity due to higher interest rates could yet to mean more pressures on the public purse in the months come.
Figures from the ONS on Friday showed that retail sales rose by 0.7% last month.
Department stores and furniture retailers said demand was boosted by good weather and summer discounts.
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2023-07-21 09:08:47Z
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