UK government borrowing falls in August

UK government borrowing fell in August, according to the latest figures from the Office for National Statistics.

Public borrowing dropped to £10.5bn last month, down £0.9bn from a year earlier, although analysts had expected the figure to fall further to £10bn.

Borrowing in the current financial year to date (April to August) has reached £33.8bn, which is £4.9bn lower than the same point last year.

The ONS added there was no clear sign of the Brexit vote affecting figures.

Chancellor Philip Hammond has said he may have to reset fiscal policy to offset any negative outcome from the vote.

Philip Hammond will present his Autumn Statement on 23 November

However, he has dampened down talk that he might reveal an increase in public spending when he reveals his Autumn Statement in November.

The ONS said receipts from income and corporation taxes rose strongly compared with a year ago, but VAT receipts rose at their slowest annual pace since March 2015.

'Mixed news'

Independent research company Capital Economics said the improvement in public finances "was unlikely to last".

Scott Bowman, UK economist at Capital Economics, said: "The improvement in the UK public finances in August was partly due to one-off timing factors and is unlikely to continue due to the economic slowdown as a result of the Brexit vote.

"The effect of the apparent slowdown in GDP growth since the vote will instead hit the public finances in coming months."

In March's Budget, the Office for Budget Responsibility estimated that the government would borrow £55.5bn in the current financial year

Howard Archer from IHS Global Insight said the latest borrowing figures were "mixed news" for Mr Hammond.

"On the positive side, this adds to the evidence that the economy has been resilient so far following June's Brexit vote, with tax receipts holding up relatively well overall.

"Nevertheless, the public finances are still off track to meet the March Budget target, which highlights the fact that the chancellor really has limited ability to provide a boost to the economy in November's Autumn Statement if he is to maintain a semblance of fiscal discipline."