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UK Public Borrowing Surges Past Expectations, Limiting Jeremy Hunt's Tax Cut Scope

The UK government borrowed £120.7bn in the last financial year, which is £6.6bn more than expected, limiting Chancellor Jeremy Hunt's ability to make substantial pre-election tax cuts.
This overshoot in borrowing, as reported by the Office for National Statistics, may make it more challenging for Hunt to deliver significant tax giveaways before the autumn election.

In March 2023, the UK borrowed £11.8 billion, which was lower than the same month in the previous year but higher than expected by financial markets.

The Office for Budget Responsibility (OBR) reported that tax receipts in March were £5.3 billion lower than anticipated, primarily due to weaker income tax and national insurance collections.

For the entire 2023-24 fiscal year, tax receipts increased by £66 billion, while spending rose by £58 billion, resulting in a yearly decrease in borrowing to £120.6 billion.

Ruth Gregory, a UK economist at Capital Economics, noted that the government ran a deficit of 4.4% of GDP in 2023-24, which was significantly higher than the 2.7% deficit in 2019-20 and the average of 3.0% in the five years before the Covid-19 pandemic.

The UK's government deficit in the 2022-23 financial year was higher than the previous year but lower than the record-breaking level during the pandemic.

The deficit was £113bn, which is double the pre-pandemic level but less than the £315bn deficit in 2020-21.

The chancellor may have less room for tax cuts due to a larger-than-expected budget deficit and rising market interest rates, leaving around £5bn in fiscal "headroom."
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