UK posts smallest deficit for December since 2000

By BLOOMBERG

LONDON • Britain recorded its smallest budget deficit for any December in 17 years as value-added tax (VAT) receipts reached a record and the Treasury received a bumper credit from the European Union (EU).

Net borrowing narrowed to £2.6 billion (RM14.14 billion), well below the median forecast of economists, from £5.1 billion a year earlier, figures showed yesterday.

It left the shortfall in the first nine months of 2017-18 at £50 billion, 12% lower than a year earlier.

The figures leave Chancellor of the Exchequer Philip Hammond on course to keep borrowing in 2017-18 to the £49.9 billion forecast by his budget watchdog in November.

But deficits are predicted to persist well into the next decade as a result of Brexit and poor productivity.

In December, Britain received a £1.2 billion credit from the EU relating to amendments to the 2017 budget. It was the largest such payment in at least 20 years and reflected “adjusted member states’ contributions to reflect updated economic forecasts”, the Office for National Statistics (ONS) said.

VAT, a tax on sales, rose 4.9% from a year earlier to an all-time high of £12.3 billion. The public finances were also aided by lower spending on welfare and departmental costs.

Yesterday’s figures cover the first full month since Hammond cut stamp duty for first-time homebuyers in an effort to help young people get onto the property ladder.

Stamp-duty revenue fell 0.9% from a year earlier, though the ONS said it had no anecdotal evidence of the effect of the relief.