British public finances strengthen in Nov as tax revenues rise

Britain's budget deficit edged down last month, official data showed on Thursday, boosted by robust income tax revenue and keeping finance minister Philip Hammond broadly on track to meet his new fiscal targets.

Britain's economy has been slowing this year following June 2016's vote to leave the European Union, but public finances are typically affected only with a significant lag, and higher inflation boosts some types of tax revenue.

Public sector net borrowing, excluding state-owned banks, fell to 8.7 billion pounds last month, the Office for National Statistics said, 1.9 percent less than the same month last year and slightly below economists' forecasts in a Reuters poll for it to rise to 8.9 billion pounds.

Borrowing since the start of the financial year in April totaled 48.1 billion pounds, 6.1 percent less than in the same period of 2016 and the lowest for this point in the financial year since 2007.

Last month the government's budget watchdog said it expected borrowing would total 49.9 billion pounds ($66.9 billion) in the 12 months to the end of March 2018. January typically brings a big surplus in the public finances as annual income tax bills fall due.

Hammond's new 2017/18 borrowing target is a lot smaller than the 58.3 billion-pound shortfall the Office for Budget Responsibility forecast in March 2018, as tax revenues had proven more resilient than expected to a slowdown in the economy caused by the last year's Brexit vote.

But the Office for Budget Responsibility was much gloomier about the years to come as Britain heads out of the European Union, downgrading its growth forecasts and penciling in nearly 30 billion pounds in extra borrowing over the next four years.

The OBR forecasts borrowing will rise by 9 percent this year and amount to 2.4 percent of gross domestic product - its first increase on this basis since the financial crisis began to ravage Britain's public finance in 2008/09 and ultimately pushed borrowing to almost 10 percent of annual economic output.

Thursday's figures showed a sharp drop in public sector net debt to 1.575 trillion pounds or 76.7 percent of annual economic output, down 3 percentage points on the previous month after public housing associations were reclassified as private-sector bodies.