Government borrowing in May falls to an eight-year low

Jessica Morris
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Income tax receipts for May will put a grin on Osborne's face - they were at their strongest for that month in four years (Source: Getty)

Strong growth in income tax receipts helped whittle government borrowing down to an eight-year low last month.

Public sector net borrowing, excluding public sector banks, was £10.12bn in May 2015, compared to £12.35bn from the same time year the same time a year ago. And this was below economists' forecasts of £10.8bn.

This meant public sector net borrowing in the first two months of the 2015/16 tax year was almost a quarter less than in April and May 2014, at £16.4bn.

Tax receipts rose 4.1 per cent to £45bn from the same time a year earlier. Corporation tax receipts fell 4.8 per cent, but VAT receipts increased 5.6 per cent while income-tax-related payment jumped 5.3 per cent.

The ONS said income tax receipts for May were their strongest for that month in four years and - when combined with national insurance contributions - this was a record high.

This is good news for chancellor George Osborne, who is expected to outline ambitious spending cuts in his post-election budget statement on 8 July.

Public sector net debt continued to climb, hitting £1.5 trillion, or 80.8 per cent of gross domestic product, representing an increase of £83.2bn compared with May 2014.

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