Treasury's Hammond gets a fillip on UK deficit at lowest for nine years

The Treasury’s coffers are in the best shape for nearly a decade, borrowing figures showed today, giving a boost to Chancellor Philip Hammond.

The deficit for the first two months of the financial year is £16.1 billion — the lowest since 2008, according to the Office for National Statistics.

May’s deficit of £6.7 billion bettered City hopes and is an early lift to Hammond’s ambitions of eliminating the UK’s deficit by the middle of the next decade, underlined in this week’s delayed Mansion House speech after he was sidelined during the election.

The improvement came as receipts grew at a faster pace than spending, thanks to decent VAT and income tax takings.

April’s borrowing has been revised down by £1 billion.

Scott Bowman, an economist from Capital Economics, said uncertainties remained as the Chancellor might yet decide to loosen the economy’s fiscal corset: “The election result suggests that the planned forthcoming fiscal squeeze may be scaled back slightly.

“Nonetheless, with Hammond stating in his Mansion House speech that he will stick to the fiscal rules set out in the November Autumn Statement, fiscal policy is still set to provide a significant drag on GDP growth over the next few years”.

The Office for Budget Responsibility’s fiscal watchdog forecasts £58.3 billion in borrowing overall for the year.