UK government borrows less than expected in December

(Sharecast News) - The UK government borrowed much less than expected last month, according to data released on Tuesday by the Office for National Statistics. Public sector borrowing, excluding banks, rose £7.8bn in December, which was below the £14.1bn economists were expecting.

It was also £8.4bn below the amount borrowed a year earlier and marked the lowest borrowing for the month of December since 2019.

For the nine months to December, total public sector net borrowing came in at £119.1bn, which was £5bn below the £124.1bn forecast by the Office for Budget Responsibility.

Ruth Gregory, deputy chief UK economist at Capital Economics, said: "After nine months of the 2023/24 fiscal year, borrowing is on track to undershoot the OBR's full-year borrowing forecast of £123.9bn by £5.0bn.

"What's more, with market interest rate expectations and long-dated gilt yields having fallen since November, we suspect the OBR will revise down its borrowing forecast significantly from 2025/26.

"That may provide the Chancellor with 'headroom' against his fiscal mandate of about £20bn in the Budget. That will probably allow him to unveil a freeze in fuel duty in April 2024 (costing about £6.0bn a year) but perhaps also to announce more crowd-pleasing measures, such as a 1p cut to income tax (costing £6.9bn a year), while still maintaining fiscally prudent appearances."