UK borrowing in December falls, creating room for potential tax cuts

Critics say that lower-than-expected government borrowing last month has raised the prospect of tax cuts in the Budget.
Critics say that lower-than-expected government borrowing last month has raised the prospect of tax cuts in the Budget.

Critics say that lower-than-expected government borrowing last month has raised the prospect of tax cuts in the Budget.

Key Points:

  • The Office for National Statistics (ONS) reported that UK borrowing in December 2023 fell to £7.8 billion, a decrease of £8.4 billion compared to the same month in the previous year.
  • Interest payments on government debt saw a sharp decline to £4 billion, down by £14.1 billion from December 2022, primarily influenced by a rapid decline in inflation.
  • The December borrowing figure was well below forecasts, providing potential “wiggle room” for tax cuts, according to analysts.
  • Chancellor Jeremy Hunt hinted at the possibility of tax cuts in the upcoming spring Budget on March 6, citing the benefits of lower taxes for economic growth.
  • The fall in inflation has increased expectations that the Bank of England may cut interest rates, potentially leading to lower future borrowing forecasts and providing more room for tax reductions.
  • While December’s figures were favorable, the overall borrowing for the nine months to December 2023 was £119.1 billion, £11.1 billion higher than the same period in the previous year, marking the fourth-highest total on record.
  • Total debt at the end of December was £2.67 trillion, equivalent to 97.7% of the UK’s GDP, maintaining levels last seen in the early 1960s.

Implications and Analysis:

The better-than-expected December borrowing figures create a potential opportunity for the UK government to consider tax cuts, as indicated by Chancellor Jeremy Hunt. 

The decline in interest payments, influenced by lower inflation, contributes to the improved fiscal situation. 

However, analysts emphasize the need for continued monitoring of economic conditions, potential interest rate changes, and the overall impact on future borrowing and tax policies. The upcoming spring Budget will be closely watched for announcements regarding fiscal measures and economic priorities.

Gary Monroe

Gary Monroe is a seasoned contributor to the Los Angeles Business Magazine, where he offers insightful analysis on local business trends and economic developments. With a focus on Los Angeles' dynamic commercial landscape, Gary's articles provide valuable perspectives for entrepreneurs and business professionals in the city.

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