By Maximilian Clarke
Public sector net borrowing dropped £1.3bn in September to £14.1bn, whilst the monthly budget deficit narrowed marginally to £11.9bn, the Office for National Statistics shows.
The drop in borrowing comes despite the UK’s continuing economic challenges, which include a declining tax-base and rising numbers of unemployed, suggesting the government’s deficit reduction programme is achieving successes.
“The borrowing figures for September were lower than expected, and the overall position in the first six months of the current financial year is better than many believed it would be,” commented David Kern, Chief Economist at the British Chambers of Commerce. “With UK economic growth likely to remain much weaker over the next few quarters than the OBR predicted in March, it is still possible that the government will overshoot its borrowing target for the year. In our September forecast we predicted a small excess of £5bn, but such a deviation should not give undue concern given the state of the economy. “
“Making allowances for these factors, we believe the fiscal strategy remains on course, and it is important for the government to persevere with the task of cutting the deficit and stabilising Britain’s public finances. At the same time, there is a case for reallocating priorities within the overall plan to strengthen growth-supporting policies to help businesses grow and invest. There is considerable flexibility within the fiscal programme and this should allow the government to support more infrastructure investment. On its part, the MPC should maintain low interest rates and supplement its QE programme with measures aimed at boosting the availability of credit to businesses.”
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