A drop in government borrowing may give the Treasury fiscal headroom to announce tax cut measures this spring, before the upcoming general election. The government borrowed less than expected in Dec. 2023, with official data showing that Britain’s budget deficit in December was £7.8 billion, £8.4 billion less than the previous year and the lowest December borrowing since 2019.
Experts had expected it to reach £11.4 billion. The Office of National Statistics (ONS) release showed that the first nine months of 2023/2024 saw borrowing of £119.1 billion, which is above the same period last year but below the forecast by the government’s budget watchdog by £4.9 billion. Additionally, the ONS stated that Britain’s year-to-date borrowing figure was helped by a £5 billion upwards revision of corporation tax receipts.
The easing of inflation has allowed the Treasury to consider tax cuts. The Autumn Statement previously announced a 2p cut to National Insurance and a tax cut on business investment. Chancellor Jeremy Hunt may use his March budget to introduce further tax cut measures in a bid to sway votes for the upcoming general election. Falling interest payments also create scope for tax cuts, according to Pantheon Macroeconomics economist Samuel Tombs. This may see the implementation of other crowd-pleasing measures come the election.