The upturn in the British economy that has been underway since the beginning of the year is beginning to feed through into public finances, according to economists Tuesday viewing public sector borrowing figures.
The public finance data for September released by the Office for National Statistics (ONS) showed clear improvement compared to a year earlier, helped by increased tax receipts.
The Public Sector Net Borrowing Requirement (PSNBR) excluding financial interventions dipped to 11.1 billion pounds (about $18 billion) in September from a shortfall of 12.1 billion pounds in September 2012. Consensus expectations had been for 11.3 billion pounds.
Current government spending rose 2.5 percent year-on-year, and tax receipts were generally up year-on-year, highlighted by the fact that current central government receipts were up 7.0 percent year-on-year.
In addition, borrowing in August was revised down by 700 million pounds with numbers for June and July also looking better thanks to higher-than-previously-thought VAT receipts and lower government spending.
Dr. Howard Archer, chief British and EU economist with IHS Global Insight, said, "If current trends were continued, the underlying PSNBR would come in around 105 billion pounds (about $170 billion) in 2013/14 which is well below the target of 120 billion pounds."
He added, "At the halfway stage of fiscal 2013/14, the deficit is clearly below the targeted rate, and it seems likely that improved economic activity will increasing feed through to help the public finances."
The British government is aiming for the PSNBR, excluding distortions, to hit 120 billion pounds (about $194.9 billion) in 2013/14, compared with the now reported actual 2012/13 outturn of 115.4 billion pounds.
Over the first six months of 2013/14 (April-September), the underlying PSNBR (excluding all distortions) came in at 56.7 billion pounds (about $92 billion), down 9.4 percent from 62.6 billion pounds a year earlier, and if trends continue PSNBR could come in at 105 billion pounds.
James Knightley, chief British economist with ING, said the improvement in figures could continue, "We are hopeful of better numbers in coming quarters given the acceleration in economic activity, which should be underlined by a very robust third quarter GDP number this Friday.
Knightley added, "Moreover, with employment continuing to rise this means less money being spent on benefits and more money received through income tax and VAT as people spend their higher incomes."
John Zhu, British economist with HSBC Global Research, said, "Better revisions to previous months mean that on an underlying basis, the government's budget deficit continues to improve.
Zhu said the government is to issue new fiscal forecasts in December, and these are likely to show income on track to meet the government's full-year fiscal targets with some room to spare.