Yael Selfin, Chief Economist at KPMG UK, comments on today’s public sector finances data
“Today’s data show a steady improvement in the state of the government’s finances; with overall borrowing reaching only £19.9bn for the fiscal year so far. These numbers will be closely watched as this is the last such bit of data before the budget is unveiled later this month.
“The data also makes good reading for the Treasury. Borrowing for last year was £5.4 billion lower than had been forecast and, extrapolating from the figures so far for this year, shows the government may be set to gain an extra £11.2bn compared to forecasts.
“The challenge for the government is now to find the best way to make use of the available resources. One option could be to refrain from making big spending commitments now – after all the Brexit deadline in March next year could still come as a shock if things do not go to plan. An extra £16.6bn could give the Chancellor some room to respond to the potential challenges.
“On the other hand, with the Prime Minister announcing an end to austerity, what better way to follow through than by raising expenditure in key areas. Extra spending on health has already been promised and other areas such as social care, prisons and local government all show a dire need for more funds. The Chancellor may also want to invest more in the future. Investments in infrastructure and skills will help the UK thrive in the long term. However, the extra pot is unlikely to be sufficient for all these demands, and the Chancellor will ultimately need to opt for either higher debt or higher taxes in order to meet these.”
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