Philip Hammond has missed his annual target for bringing down the budget deficit, despite borrowing dropping to the lowest level since 2002.
The Office for National Statistics said that borrowing in the latest full financial year, which ended in March, was £24.7bn, down by 41% from a year earlier but above the target set for the chancellor.
Public sector net borrowing was £1.9bn more than the £22.8bn forecast by the Office for Budget Responsibility, the government’s tax and spending watchdog, in last month’s spring statement.
While higher than Hammond’s target for the year, the latest analysis of the public finances reveals a steadily improving picture over the past decade as the UK economy has gradually recovered from the last recession.
Full-year borrowing as a share of economic output has fallen to the lowest level in 17 years, at 1.2% of GDP, from a peak of almost 10% in 2010, when the government finances were blown apart by the financial crisis and the recession it triggered.
Each year of borrowing has contributed to a rise in public sector debt, with the total value of government debt reaching £1.8tn last year. However, the economy has been growing at a faster rate, helping debt as a percentage of GDP to shrink from 84.6% in 2017-18 to 83.1% last year.
The ONS said Britain ran a budget deficit of £1.7bn in the month of March, above the £400m forecast made by City economists, amid a rise in spending last month.
The chancellor has previously promised a Brexit deal dividend to increase spending on public services, should MPs agree a deal to smooth Britain’s withdrawal from the EU this year. At the budget in the autumn, Hammond agreed to boost NHS spending by £20bn a year by the early 2020s to satisfy a promise made by Theresa May but did not announce significant tax rises to pay for the increase.
Hammond has said he has as much as £26.6bn held in reserve for either spending on rescuing the economy from a damaging no-deal departure or boosting the economy through higher public spending should Brexit pass smoothly.
However, the OBR has warned that changes to the way student loans are accounted for in the public finances, due to be made later this year, could add at least £10bn to the budget deficit.
