Data on the U.K.'s public sectorborrowing requirement has boosted hopes of a large fiscal
adjustment for the coming financial year, broking and banking
analysts said.
    Some analysts say that the Chancellor of the Exchequer
Nigel Lawson may announce this afternoon a total of up to six
billion stg in tax cuts and lower government borrowing targets.
    Total PSBR in the first 11 months of the fiscal year of 100
mln stg compares with a projected seven billion. Forecasts had
generally been for a net repayment in February, but the 300 mln
stg repayment was toward the better end of expectations.
    March is usually a high-spending month, boosting the 11
month figure at the end of the fiscal year. Nevertheless,
Lawson is expected to downwardly revise the 1986/87 PSBR later
today.
    Until now, only the more optimistic forecasts put Lawson's
room for manoeuvre as great as six billion stg for 1987/88,
with many favouring a four billion of five billion package.
    But Bill Martin, economist at brokers Phillips and Drew,
said a six billion stg adjustment now looks within range, split
between three billion off the PSBR and three billion off taxes.
    Malcolm Roberts, of Salomon Bros International, also said
six billion was within a credible range of forecasts.
    Roberts added that he was now expecting Lawson to have at
least five billion stg available following this morning's data,
against his own previous estimates of around four billion.
    He said today's 11 month PSBR figure was genuinely low,
rather than distorted by unusual factors, which fuels pressure
on Lawson to reduce next year's borrowing target. However, he
forecast a March 1987 PSBR of 3.5 billion stg.
    Peter Fellner, of brokers James Capel, cautioned that six
billion still looks on the high side of expectations.
    "Something like 4.5 (billion) or so is still more realistic,"
he said.
 Reuter
