U.K. Posts Lowest November Budget Deficit Since 2007 on Tax

(Bloomberg) -- Britain recorded its lowest November budget deficit for a decade as tax receipts posted another month of healthy growth.

Net borrowing narrowed to 8.7 billion pounds ($11.6 billion) last month, below the median forecast of economists, figures from the Office for National Statistics showed Thursday. It left the shortfall in the first eight months of 2017-18 at 48.1 billion pounds, down 6 percent from the same period a year earlier.

U.K. Posts Lowest November Budget Deficit Since 2007 on Tax

Tax receipts rose 5 percent in November, boosted by income tax, value-added tax and stamp duty on property purchases. Tobacco duty receipts also rose to a November record after a budget duty increase. Government spending increased by 3.6 percent.

Chancellor of the Exchequer Philip Hammond has benefited from buoyant revenue this year, prompting his budget watchdog to lower its full-year deficit forecast to 50 billion pounds -- around 2.4 percent of gross domestic product.

Much will depend on January, the deadline for settling self-assessed tax liabilities. Business owners paid themselves early dividends in 2016 to avoid a tax increase and the extra revenue generated poured into the Treasury at the start of this year. The unwinding of this is expected to depress receipts in early 2018.

Debt Costs

The public finances are also under pressure from rising debt costs as faster inflation makes index-linked bonds more expensive. Government interest payments rose 16 percent between April and November.

The OBR last month raised its borrowing forecasts for the next four years, reflecting a weaker outlook for productivity and tax and spending giveaways announced by Hammond in his Nov. 22 budget. Britain is still set to be borrowing 35 billion pounds by the end of the decade, instead of the surplus predicted before the June 2016 vote to leave the European Union.

The ONS figures show net debt fell to 76.7 percent of gross domestic product last month, the lowest since February 2013. The decline was due to the reclassification of English housing associations as private-sector entities, which removed 66 billion pounds of debt from the government books.

©2017 Bloomberg L.P.