Can Jeremy Hunt really afford more tax cuts?

On the face of it, this morning’s public sector finance update is good news. The government borrowed £7.8 billion in December last year. This is well below the £11 billion that economists had expected and almost half the £14 billion last forecast by the Office for Budget Responsibility (OBR). These are the lowest borrowing figures for December since the pandemic hit. 

Once again, larger tax receipts helped fill in the gaps: up on the year to £61.1 billion – £3.5 billion higher than December 2022 – though on this occasion they notably undershot the OBR’s expectations by £1.8 billion, suggesting a minor slowdown. A large contributor to lower borrowing figures overall was a fall in debt servicing payments, which were £4 billion last month. This is a staggering £14.1 billion less than the previous year, and £5.5 billion less than the OBR had forecast for December 2023.

This is all good news for Jeremy Hunt, who promised at the weekend that tax cuts were coming in the March Budget.