The U.K. budget deficit narrowed on higher tax receipts in October, ahead of the announcement of the Chancellor's Autumn Statement on Wednesday.

Public sector net borrowing, excluding public sector banks, decreased by GBP 1.6 billion from the previous year to GBP 4.8 billion in October, the Office for National Statistics reported Tuesday. The expected level of budget deficit was GBP 6 billion.

Of this GBP 4.8 billion, GBP 2 billion related to the cost of the "day-to-day" activities of the public sector and GBP 2.8 billion related to the spending on infrastructure.

Tax receipts increased 6.8 percent from the prior year, while expenditure gained only 2.2 percent in October.

While Chancellor Philip Hammond would have welcomed October's improvement in the public finances, it is unlikely to be a sign of things to come, Scott Bowman at Capital Economics, said.

This will probably prevent him from being too bold in the Autumn Statement, the economist added.

IHS Global Insight economist Howard Archer said a concern for the chancellor is that the public finances are likely to be hampered over the rest of the fiscal year and beyond by higher gilt yields lifting interest payments and higher inflation raising costs.

And an expected marked slowdown in growth over the coming months will take a toll on tax receipts - although this is likely to show up more after the current fiscal year, Archer noted.

Hammond is expected to prioritize infrastructure spending to attract more businesses and provide more funds to boost broadband speed in his Autumn Statement tomorrow.

Markets await to see whether government unveils fiscal expansion to make good the loss caused by the 'Brexit' decision. The chancellor is expected to provide more funds to boost broadband speed and raise infrastructure spending to attract more businesses.

During the current financial year-to-date period, PSNB fell by GBP 5.6 billion to GBP 48.6 billion. The full-year target set in March was GBP 55.5 billion.

At the end of October, public sector net debt totaled GBP 1,641.6 billion, equivalent to 83.8 percent of gross domestic product.

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