UK government borrowing dropped more than expected in May

UK government borrowing dropped more than expected in May, with public sector borrowing down by £2 billion from a year earlier to £5 billion, according to the Office for National Statistics (ONS).

The decline is the lowest May net borrowing since 2005 and brought borrowing up to £11.8 billion for the financial year to date. This is £4.1 billion less than in the same period last year.

At the end of May, public sector net debt, excluding public sector banks, was £1,781.4 billion, which is equivalent to 85% of gross domestic product (GDP). This represents a 0.4% decline (as a ratio of GDP) compared to May 2017.

The ONS also revealed that borrowing in the latest full financial year (April 2017 to March 2018) was the lowest in 11 years.

In the latest financial year public sector borrowing was £39.5 billion, £6.2 billion less than in the previous financial year (April 2016 to March 2017) and £5.7 billion less than official expectations.

The ONS said it expects public sector borrowing to drop to £37.1 billion in the April 2018 to March 2019 financial year.

The data comes as Chancellor Philip Hammond prepares to make a speech on how taxes must rise, with increases done in a “fair and balanced way”.

Hammond will likely be pleased with the figures. He has promised to cut public debt, despite Prime Minister Theresa May pledging an increase in health spending earlier this week.

Andrew Wishart of consultancy Capital Economics told Reuters: “If the economy holds up as we expect, borrowing is likely to undershoot the Office for Budget Responsibility’s forecast by a more significant margin in subsequent years.”

“This would allow the chancellor to deliver the recently promised increase in health spending over the next five years while still meeting his fiscal target,” Wishart added.