Fiscal challenge 'likely to get harder', says Reuters

Government borrowing is at its lowest since the 2008 financial crisis, according to the Office for National Statistics.

In the year to March, borrowing fell by £20bn to £52bn as the economy proved more resilient than expected in the aftermath of the Brexit vote and growth helped drive tax receipts higher.

The news means the Chancellor, Philip Hammond, has avoided a potentially embarrassing slip-up before June's general election.

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But although he has hit his budget deficit target for the 2016/17 financial year, the "fiscal challenge is likely to get harder", says Reuters.

The Office for Budget Responsibility expects borrowing to rise again this year to £55.2bn, "partly due to one-off factors but also because of slowing growth as consumers rein in spending in response to rising shop prices", says The Guardian.

John Hawksworth, chief economist at PwC, told the paper that the government would have to make difficult decisions on tax and spending.

He added: "In the longer term an ageing population and rising healthcare costs will also put pressure on the public finances".

The Chancellor has already hinted that the Conservative Party will drop its promise not to raise income taxes, VAT or national insurance contributions, arguing they limit his flexibility to manage the economy.

There are also doubts whether the government will stick to its "triple lock" pledge to increase pensions at the highest rate of inflation, in line with average earnings or by 2.5 per cent, whichever is highest.

Last month, Hammond was forced to abandon plans for a rise in self-employed national insurance contributions after an outcry from the press, the opposition and members of his own party, who said it broke the 2015 Tory manifesto pledge.