An increase in tax receipts last year helped Chancellor Philip Hammond to remain on track to meet a deficit reduction target this year, with the corporation tax take rising by 12.4 per cent to £4bn.
According to the Office for National Statistics (ONS), government borrowing fell by £0.4bn in December to £6.9bn compared with 2015, meaning that borrowing for the year is £63.8bn, £10.6bn lower than for the same period a year ago.
Commenting on the figures, the Office for Budget Responsibility (OBR) said that growth in corporation tax receipts remained stronger than its full-year forecast, which might reflect the resilience of sales growth since the referendum over whether or not to leave the European Union.
The OBR also expects self-assessment tax receipts to be higher at the beginning of next year following a rise in dividend tax last April. This should see borrowing coming in slightly below its current £68bn forecast for the 2016-17 tax year.
However, the OBR also said that weaker stamp duty receipts this year following the introduction of a 3 per cent surcharge on landlords and buyers of second homes would “dampen the improvement” in the public finances.
A Treasury spokesman said that the Government had made “significant progress in repairing the public finances” by getting the deficit down from 10 per cent of gross domestic product (GDP) six years ago to 4 per cent. If the Chancellor stays on track, the borrowing figure should fall to 3.5 per cent.
While the British Chambers of Commerce (BCC) found the figures encouraging, a spokesman said that if the economy slows in the near term, which is likely, the UKs capacity to collect enough tax revenue to consistently achieve deficit reduction in the coming years would be further restricted.
