On the eve of the Autumn Statement, the Office of National Statistics has released figures on public finances for October, and they contained a nice surprise.
Last month, the government borrowed less than it borrowed last year, and less than expected. But economists are saying that despite the October boost, government borrowing for the current financial year will be way over target, leaving the chancellor Philip Hammond little wiggle room in his Autumn Statement.
In total, public sector net borrowing excluding public sector banks (PSNB ex) was £4.3 billion in October, compared to £6.4 billion in the same month in 2015, and consensus expectation of £6.0 billion.
Alas, during the first six months of the year, borrowing overshot badly.
And in the first seven months of the year, PSNB ex has been 10.3 per cent less than in the same period in the year 2015/16, and is on course for ending the year with borrowings of £68.1 billion, some £12.6 billion less than forecast in the March budget.
There may be some good news over the horizon, self-assessment receipts in January and February 2017 should see a £2.5 billion or so lift from rising dividend tax payments. Then again, GDP growth has fallen behind expectations, and the year got off to a bad start.
Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics predicted that the Office of Budget Responsibility “will revise up sharply its forecast for borrowing in future years.” He added that “the Chancellor’s warning at the weekend that he is ‘highly constrained’ suggests that there will be few sweeteners for the ‘JAMs’– people ‘just about managing’ – in tomorrow’s Autumn Statement.”
Scott Bowman, UK Economist at Capital Economics, said: "We think that the Autumn Statement will feature a modest stimulus package of around an annual £7 billion in 2017/18. This will help offset some of the negative effects of Brexit-related uncertainty on the economy. However, due to the significant fiscal squeeze planned in the March Budget, this wouldn’t be enough to prevent fiscal policy from dragging on economic activity over the next few years.”