British public borrowing was lower than expected in December, helped by an increase in cash tax receipts, but still hit record highs for the month and financial year to date, official data showed on Thursday.
"It's a rare positive surprise," said Alan Clarke, economist at BNP Paribas. "It looks like the blow-out of the public finances is slowing down to some extent."
The Office for National Statistics said the public sector posted a net cash requirement of 23.60 billion pounds last month, a record high for the month but below analysts forecasts for a reading of 26.0 billion pounds.
The government's preferred accruals-based measure of public sector net borrowing came in at 15.719 billion pounds, also a December record but again below expectations for 18.75 billion.
The figures were helped by a second consecutive annual rise in monthly cash tax receipts and analysts said that trend could continue as the government raised VAT in January, but warned that major fiscal tightening was still needed.
"That fiscal tightening still needs to come through but these numbers at the margin are better than we had feared," said David Page, economist at Investec.
The government expects borrowing to come in at 178 billion pounds this year, topping 12 percent of gross domestic product, but has pledged to halve its deficit over the next four years.
The pound dipped briefly to hit a one-week low against the dollar after the data, but gilts were little changed and analysts said the figures were less bad than they had feared.
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Graphic on UK Dec public borrowing: http://graphics.thomsonreuters.com/0110/UK_PSNB0110.gif
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In a sign that the pressure on public finances may be starting to ease, total current receipts on an accrued basis fell by 0.4 percent in December to 37.0 billion pounds — the smallest year-on-year decline since September 2008.
On a cash basis, receipts were 1 percent up on the year in December at 30.7 billion pounds.
However, there was some way to go. Tax receipts in January are likely to be a lot lower than last year because they will reflect annual income tax payments for the 2008/09 tax year, when the economy was in recession, as opposed to January 2009, when tax payments for 2007/08 reflected a healthier economy.
In the year to date, public borrowing is sharply higher with both the PSNB and PSNCR measures setting record highs.
The ONS said that total net borrowing reached 61.7 percent of GDP in December, the highest since records began in 1974. Excluding the government's bank bailouts, however, net debt was 52.5 percent of GDP.
