Likely slowdown in growth means deficit set to remain high by historical standards - EY ITEM Club comments

21 December 2016

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  • Fiscal deficit sees a modest drop in November…
  • …while borrowing remains on track to meet OBR’s forecast
  • Likely slowdown in growth means deficit set to remain high by historical standards 

 Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“2016 has so far delivered a year-on-year drop in public sector borrowing in each month bar September. November’s deficit followed that trend with a fiscal shortfall of £12.6bn compared to November 2015’s £13.2b. However, in percentage terms, the 4.4% fall was down on the double-digit improvements seen earlier in the year. 

“Growth in central government revenues of 3.6% year on year was some way below the average rise recorded in the previous six months. And income tax receipts saw the first fall since May, but revenue from VAT was up by a robust 4.4%, while corporation tax receipts surged by 23%.

“November’s outturn takes borrowing in the fiscal year-to-date to £59.5b, £7.7b or 11.5% down on the deficit seen in the same period in 2015-16. Consequently, the Government is on track to meet the OBR’s Autumn Statement forecast for a deficit of £68.2b in 2016-17. But this target has become increasingly soft – the Autumn Statement saw a significant downgrade from the OBR‘s previous forecast for borrowing of £55.5b. A softer target means that the prospect of a weakening in economic growth in 2017 should not cause borrowing to veer off target, but the fiscal gap will remain sizeable by historical standards.”


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