Government borrowing falls sharply as national insurance hike boosts coffers

Danni Hewson, head of financial analysis at AJ Bell, said: “The significant fall in government borrowing in December will be a relief for the Treasury, especially since January’s numbers are likely to look even better with a surge in self-assessment receipts expected.

“Spending nudged up compared with the previous year, primarily because of increases to benefit payments and pay rises, but that was more than offset by an increase in the cash coming into the government’s coffers.

“Frozen tax thresholds coupled with chunky pay rises mean people have been paying more tax, and Rachel Reeves’ changes to employer National Insurance also helped total receipts shoot up by £7.7 billion.

“But zoom out to take in the full financial year to date and the picture isn’t quite as rosy, with total borrowing to the end of December at levels only seen twice before. The deficit is reducing, but the pace of the reduction is glacially slow. With further increases to benefit payments on the way in April, the pressure on the public purse is still uncomfortable.

“Stabilisation is one thing and if cost pressures can be kept in check the path forward looks less boggy than what’s behind us. But inflation is still sticky, interest on all that debt is up on the same period last year and growth remains sluggish.”