UK finance minister Hammond beats target as deficit hits
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[April 24, 2018]
By William Schomberg and Alistair Smout
LONDON (Reuters) - British public borrowing
fell to a 16-year low during the financial year just ended, according to
official data which may increase pressure on finance minister Philip
Hammond to relax his grip on public spending.
The budget deficit for the financial year which ended in March dropped
to 2.1 percent of gross domestic product from 2016/17's 2.3 percent, the
lowest since 2001/02.
In cash terms, borrowing was 8 percent lower than a year before at 42.6
billion pounds ($59.4 billion), below the 45.2 billion pounds forecast
by Britain's budget watchdog last month.
It was also comfortably under the watchdog's previous forecast of just
under 50 billion pounds, set in November.
Hammond has made fixing the public finances his priority, although he
has taken a slower approach than previous finance minister George
Osborne who inherited a deficit equivalent to just under 10 percent of
GDP in 2010.
Hammond has made more progress than expected on improving the public
finances because Britain's economy slowed less than feared after the
2016 Brexit referendum shock.
However, Hammond still faces tough choices after promising to end years
of real terms pay cuts for many public sector workers at a time when he
is also facing calls to spend more on health and other services.
Hammond says he wants to get rid of the deficit altogether the mid-2020s
but, conscious of the weariness of many voters after a decade of
spending restraint, he has suggested he could announce more spending in
his budget in November.
In a tweet, Hammond reiterated a previous comment that Britain's economy
was at "a turning point".
"The key challenge facing the chancellor in his budget in November will
be how to trade-off growing political pressures to ease austerity
against his desire to get the debt ratio down as far as possible before
the next economic downturn hits," John Hawksworth, chief economist at
accountancy firm PwC, said.
[to top of second column]
Britain's Chancellor of the Exchequer Philip Hammond, leaves 11
Downing Street in London, March 14, 2018. REUTERS/Toby Melville
DEBT HEADING DOWN
Public debt stood at 1.798 trillion pounds, or 86.3 percent of GDP, up from 85.3
percent in the previous financial year and more than double its level before the
The headline public sector net debt figures are inflated the effect of a
temporary Bank of England lending stimulus scheme.
Hammond wants to bring down debt as a share of GDP each year from the 2018/19
financial year, something which is a near certainty due to the impending
reversal of the BoE scheme.
Stripping out the effect of the BoE scheme, net debt as a share of GDP has been
falling for two years and touched a six-year low of 76.3 percent last year,
albeit flattered by a changed treatment of public housing.
The current budget, which measures day-to-day government spending but not
investment, showed a small surplus of 0.1 billion pounds in 2017/18, the first
such surplus since 2001/02.
In March alone, the full budget deficit stood at 1.3 billion pounds, nearly 37
percent smaller than in the same month last year, the Office for National
The shortfall was also smaller than a median forecast of 3.25 billion pounds in
a Reuters poll of economists.
($1 = 0.7173 pounds)
(Writing by William Schomberg; Editing by Alison Williams)
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