It was the latest sign of Britain’s post-referendum economy defying previous warnings about the impact of a vote to leave the European Union.
However experts also warned the budget deficit – the amount by which Government spending exceeds income – remains far too high.
The Office for National Statistics said public sector net borrowing dropped by £0.4billion to £6.9billion last month.
Britain's economy continues to defy Brexit warnings as the Tories looks set to meet borrowing goals
That was £0.2billion above economists’ expectations of £6.7billion.
But the ONS also revised down November’s borrowing, from £12.6billion to £11.3billion – which means the public finances ended 2016 in better shape than previously thought.
Government borrowing for the financial year so far from April to December is now 14.3 per cent or £10.6billion lower, at £63.8billion, than over the same nine months of 2015.
Chancellor Philip Hammond will still have to deal with an 'uncomfortably high' budget deficit
It puts the Government in line to meet the Office for Budget Responsibility forecast of £68.2billion borrowing for the whole of 2016-17 – although that prediction made in November was significantly higher than its pre-referendum forecast last March of £55.5billion.
The budget deficit remains uncomfortably high
John Hawksworth, of PwC
Martin Beck, senior adviser at the EY ITEM economic forecasting “club”, said: “This leaves the Government well-placed to undershoot the OBR’s full-year forecast of £68.2billion by a comfortable margin.
“If the final three months of the fiscal year see the same improvement as the first nine, borrowing would come in just above £61billion.”
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John Hawksworth, of PwC, expects total 2016-17 borrowing to be about £64billion but stressed that was still “well above” the OBR’s pre-referendum forecast.
BREXIT: Supreme Court Ruling
Tue, January 24, 2017
Britain's most senior judges ruled that Prime Minister Theresa May does not have the power to trigger the formal process Article 50 for the UK's exit from the European Union without Parliament having a say.
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Issued by the Supreme Court of (top row, from the left) Lord Neuberger, Lord Mance, Lord Kerr, Lord Sumption, (bottom row, from the left) Lady Hale, Lord Clarke, Lord Wilson and Lord Hodge, who agreed with the majority decision that the Government could not trigger Article 50 without Parliamentary approval.
He concluded: “Overall, the somewhat better outlook for the public finances is consistent with the slightly better than expected performance of the economy as a whole since the EU referendum in June.
“But the budget deficit remains uncomfortably high, so this will not give the Chancellor much additional room for manoeuvre in his Budget on 8th March.”
Howard Archer, of IHS Global Insight, said: “Largely healthy tax receipts in December pointed to ongoing resilient economic activity with robust increases in corporation tax and income tax receipts.
The new Charter will replace George Osborne's promise to remove the deficit by 2020
“For now at least, the Chancellor looks solidly on course to – at the very least – hit the 2016-17 budget deficit target contained in November’s Autumn Statement.
“Indeed, there currently looks to be a very real chance that the public finances could undershoot the revised target for 2016-17.”
A spokesman for the Treasury said the Government had made “significant progress in repairing the public finances” by driving down the deficit over the past six years from 10 to four per cent of GDP income.
But there was further to go and Chancellor Philip Hammond today presented for MPs’ approval the updated Charter for Budget Responsibility he issued last year at the time of the Autumn Statement.
It sets out new deficit, debt and welfare spending targets designed to meet his aim of bringing public finances back into balance – so the Government no longer has to borrow to cover spending – as soon as possible after the 2020 general election.
The new Charter replaces predecessor George Osborne’s pledge to balance the books by 2020. The current government ruled last year that the economy needs more flexibility to cope with uncertainties sparked by last June’s shock vote for Brexit.
Today’s ONS figures showed strong growth in National Insurance Contributions, Corporation Tax and VAT receipts. Income tax grew more slowly but that may change as this is a bumper month for self-assessment payments ahead of the January 31 annual deadline.
The OBR has forecasted uncertainty despite borrowing being down
The OBR conceded that April to December borrowing was down by more than it had expected but cautioned: “The biggest months for receipts – and the biggest sources of forecast uncertainty – are still to come.”
Uncertainties include the level of income tax receipts, particularly relating to City bonuses in a volatile year for the financial markets.
Stamp duty receipts are expected to be lower than last year because people rushed purchases of buy-to-let properties and second homes in early 2016 to beat an April tax hike.
Government debt interest payments are expected to have risen with inflation, added the OBR.