Data from the Office for National Statistics (ONS) showed government borrowing fell to its lowest level since 2002 in the four months to the end of July, meaning the government can increase spending, according to the chief UK economist at Pantheon Macroeconomics.
Samuel Tombs said borrowing in the financial year to 2019 would be much less than predicted if this trend continued which would give Chancellor of the Exchequer Philip Hammond wiggle room when it came to his Budget.
The data showed the public finances to be in surplus to the tune of £2bn in July, compared with £1bn in July 2017.
July tends to be a strong month for the public finances because cash arrives in the government’s coffers due to self assessment tax payers settling up but the £2bn figure was still the largest July surplus since 2000.
For the financial year to 2019, the Office for Budget Responsibility (OBR) predicted UK government borrowing would be £23.7bn this year, less than a quarter of the level in 2010.
Mr Tombs said: “If this trend persists, borrowing will total just £23.7bn this year, much less than the £37.1bn forecast by the OBR in the Spring Statement."
He said Mr Hammond will be able to be flexible in future budgets and still hit his target for deficit reduction.
Neil Woodford, who runs the £6bn Woodford Equity Income fund, has taken a more positive view of the UK economy than have most of his peers.
He thinks the fundamentals of the UK economy are strengthening, rather than weakening, and the stock market cannot "ignore" such data for much longer.
The most recent GDP data for the UK, covering the three months to the end of June 2018, showed the economy expanded by 0.4 per cent, the same level as the Eurozone in that time period, and twice the rate of France.
Kathleen Brooks, research director at Capital Index, said: "The pound received a boost after the UK recorded the biggest Government surplus for 18 years, with borrowing down as well as tax take up.
"Total tax take is up some 4.5 per cent, which suggests that the improvement to the UK’s public finances could be down to permanent rather than temporary factors. It may also be a sign that the Chancellor has room to cut taxes ‘US-style’ in his Autumn budget, in time to give the UK economy a boost ahead of Brexit."
Ed Legget, who runs the £742m Artemis UK Select fund, said there were still risks to the economy.
He said: "The uncertainties surrounding trade policy and Brexit negotiations start to weigh on corporate and consumer confidence, leading to a slowdown in activity.
"On the former, it is difficult to read Trump’s intentions, but forthcoming mid-term elections, his love of making deals and the fact that US corporations and unions are starting to speak out about the negative consequences for US jobs would suggest there should be a desire on all sides to de-escalate tensions over the summer.