2018.04.2500:14:00UTC+00UK Deficit Returns to Pre-Crisis Levels

Britain's budget deficit has fallen to its lowest level since before the financial crisis, according to official data, which may increase pressure on finance minister Philip Hammond to relax his grip on public spending.

The Office for National Statistics said public sector net borrowing, excluding the state-owned banks, dropped by £3.5 billion to £42.6 billion in the last financial year, reducing the budget deficit to the lowest level since the year ending March 2007.

For the first time since 2001-02, the government met its original target of eliminating the current budget deficit, excluding net investment in the last financial year. After eight years of austerity, borrowing is now back to the levels considered normal before the crisis.

The deficit between how much the government spends and receives in tax was £2.6 billion lower than that forecast by the Office for Budget Responsibility. Although the figures will be finalised later this year, the government's spending regulator said lower-than-expected local authority borrowing helped to explain much of the difference.

Hammond has made fixing the public finances his priority, although he has taken a slower approach than previous finance minister George Osborne who inherited a deficit equivalent to just under 10 percent of GDP in 2010.

Hammond has made more progress than expected on improving the public finances because Britain's economy slowed less than feared after the 2016 Brexit referendum shock.

Public debt stood at £1.798 trillion, or 86.3 percent of GDP, up from 85.3 percent in the previous financial year and more than double its level before the financial crisis. Hammond wants to bring down debt as a share of GDP each year from the 2018/19 financial year, something which is a near certainty due to the impending reversal of the BoE scheme.