UK (finally) on track to meet borrowing target

It is not a headline that followers of UK economic trends will be accustomed to reading, but the UK is on track to meet its borrowing targets.

In fact, after the Office for National Statistics forecast a drop in borrowing in December and revised down the figure for April to November, it is possible the government may beat its targets for the financial year.Last month, the government spent £6.9bn more than it collected in tax, meaning the shortfall was £400m smaller than December 2015, says the BBC.

Meanwhile, for the eight months to the end of November, the deficit was revised lower by £2.6bn, "mostly due to tax receipts being higher than estimated", says the Financial Times.

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The net result is that total borrowing for the nine months to the end of December was £63.8bn, down from the £74.4bn for the same period a year earlier.

For the year as a whole, the Office for Budget Responsibility (OBR) has estimated borrowing of £68bn. January is the one month of the year when tax receipts are typically higher than spending, leaving ample headroom going into February and March.

The OBR predicts tax receipts this January will be £2.5bn better year-on-year due to an increase in the dividend tax collected with self-assessment returns during the month.

Having made a habit of missing deficit projections, the figures are good news for the government, although they're only possible because fiscal goals were relaxed at the Autumn Statement.

Chancellor Philip Hammond updated the government's so-called "fiscal charter" to now state that the country must run a deficit of no more than two per cent during this parliament.

His predecessor, George Osborne, had said he would return the public finances to surplus by 2019, but that goal was abandoned in the wake of the Brexit vote.

Suren Thiru, head of economics at the British Chambers of Commerce, said: "The UK's fiscal position… is likely to come under increasing pressure in the near term if UK economic growth weakens as expected."