Dividend windfall shows high earners can be induced to pay

Britain's public finances are still expected to be in the red by the 2021/22 financial year, the end of the forecast period of the Office for Budget Responsibility.

"And for those who care about such things, it means we are forecast to meet our 3 per cent European Union stability and growth-packed target this year for the first time in nearly a decade".

Sir Charlie Bean said households "have been running down savings" to fund consumption.

"Consumer credit growth has been relatively strong for instance", he added.

"But the most important thing is that is not sustainable".

The comments came as Mr Hammond was handed a double boost ahead of Britain's imminent divorce from the European Union, as forecasts revealed a short-term upgrade to United Kingdom growth and a fall in government borrowing.

However, the OBR judged that consumption growth will slow next year "as real incomes are squeezed by higher inflation", given the higher sterling prices of imports.

In its latest independent forecasts, the OBR revised up its outlook for United Kingdom gross domestic product (GDP) this year from 1.4% to 2%.

CIPFA chief executive Rob Whiteman said the statement built on the previous Autumn Statement and was delivered by a confident chancellor.

"Combining these factors with the higher short term forecast for growth and taking into account the measures I shall announce today, the OBR now forecasts both borrowing in 2016/17 to be £16.4billion lower than forecast in the Autumn at £51.7bn".

It said the Government would rake in an extra £7.5 billion in taxes thanks, in part, to stronger-than-expected corporation tax receipts.

"Overall public sector net borrowing as a percentage of GDP is predicted to fall from 3.8% last year to 2.6% this year", Hammond told MPs.

The OBR revised its 2017/18 forecast from £59 billion to £58.3 billion and 2018/19 from £46.5 billion to £40.8 billion.

Benchmark 10-year Gilt yields remained marginally up on the day, rising from 1.19% to 1.2%.

The watchdog's inflation forecast shows consumer prices growing by 2.4 per cent this year before returning to the Bank of England's two per cent target in 2019.

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