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UK public finances post surplus in July | UK public finances post surplus in July |
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Britain’s public finances showed a smaller-than-expected surplus in July, a month typically lucrative for the government as businesses settle their tax bills. | |
In the month following the Brexit vote, the government achieved a surplus of £1bn as it earned more in tax income than it spent. But that was lower than a £1.2bn surplus in the same month last year and below economists forecasts for £1.6bn in a Reuters poll. | |
Economists said the latest figures from the Office for National Statistics were disappointing, and warned the Brexit vote was likely to deal a bigger blow to public finances in the coming months and years. | |
“Slightly disappointing news for the chancellor, Philip Hammond, as the public finances could only eke out a small surplus in July,” said Howard Archer, chief UK economist at IHS Global Insight. | |
“The public finances look poised to take a serious hit from probable significantly weakened economic activity after the Brexit vote taking a toll on tax receipts in particular. It also seems probable that unemployment will rise while any slowdown in the housing market will hit stamp duty receipts.” | |
The July surplus was driven by a rise in tax receipts, which were up 3.4% compared with a year earlier at £61.8bn. Corporation tax receipts rose 8.4% to £7.5bn, while income tax payments rose by 1.9% to £18.9bn. | |
Central government spending rose by 1.4%, at £58.4bn. | |
In the current fiscal year starting in April, the government has borrowed a total of £23.7bn, £3bn lower than at the same point last year. | |
In the year ending March 2016, when George Osborne was chancellor, the deficit was £75.3bn, £16.5bn lower than the year before. | |
David Gauke, the chief secretary to the Treasury, said: “With the public finances in surplus in July, our economy starts from a position of strength to face any economic turbulence following the vote to leave the EU. | |
“As we keep working to cut the deficit, we are well-placed to handle any challenges and seize the opportunities as our economy adjusts.” | |
The ONS cautioned that the picture was not entirely clear because it was still collecting data for July. | |
“Estimates for the latest period always contain a substantial forecast element and so any post-referendum impact may not become clear for some time.” | |
The Office for Budget Responsibility – the Treasury’s independent forecaster – is likely to revise its forecasts for government borrowing at the autumn statement later this year, taking into account the impact of the Brexit vote. | The Office for Budget Responsibility – the Treasury’s independent forecaster – is likely to revise its forecasts for government borrowing at the autumn statement later this year, taking into account the impact of the Brexit vote. |
At the time of the March budget, the OBR was forecasting a full-year deficit of £55.5bn. | |
Suren Thiru, head of economics at the British Chambers of Commerce, a business lobby group, said fixing the public finances by further reducing the deficit would be “an increasingly uphill task” if economic growth slows in the coming months. | |
Earlier on Friday, the chief economist of the ONS, Joe Grice, said signs of undented consumer confidence, underlined by Thursday’s retail sales data, did not mean the UK would avoid a post-vote recession. “Does that mean there won’t be a recession? No. The story is still to unfold,” he said. |