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| UK is briefly in the black – but fixing the public finances will take time | UK is briefly in the black – but fixing the public finances will take time |
| (35 minutes later) | |
| The government was in the happy – and unusual – position of being in the black in July. To the surprise of the City, tax receipts were higher than public spending. Not by much, but a surplus is still a surplus even if in the context of a £1.8tn economy it is small change. | |
| This, though, was a classic case of one swallow not making a summer. For a start, the deficit in the first four months of the financial year – a much better guide to the trend than a single month’s figures – was higher this year than last. | This, though, was a classic case of one swallow not making a summer. For a start, the deficit in the first four months of the financial year – a much better guide to the trend than a single month’s figures – was higher this year than last. |
| Moreover, despite strong growth in employment, PAYE receipts last month were only 1.6% higher than in July 2016. That is entirely consistent with an economy where workers struggling to secure a decent pay rise are not paying very much tax. | Moreover, despite strong growth in employment, PAYE receipts last month were only 1.6% higher than in July 2016. That is entirely consistent with an economy where workers struggling to secure a decent pay rise are not paying very much tax. |
| The first July surplus since 2002 was an improvement on a small £400m deficit in July 2016 but close examination of the Office for National Statistics data suggests that was the result of an £800m jump in receipts from self-employment. | The first July surplus since 2002 was an improvement on a small £400m deficit in July 2016 but close examination of the Office for National Statistics data suggests that was the result of an £800m jump in receipts from self-employment. |
| But as a number of analysts pointed out, in 2016 the deadline for the self-employed fell on a weekend, with the result that many payments were not processed until August. To judge whether there has been any real improvement in self-employment receipts we will have to wait for the August data to come out. | But as a number of analysts pointed out, in 2016 the deadline for the self-employed fell on a weekend, with the result that many payments were not processed until August. To judge whether there has been any real improvement in self-employment receipts we will have to wait for the August data to come out. |
| The bigger picture is this. On current trends, the public finances are likely to be in the red by about £50bn for the 2017-18 financial year as a whole – a bit worse than last year when the figures were flattered by a couple of one-off factors. | The bigger picture is this. On current trends, the public finances are likely to be in the red by about £50bn for the 2017-18 financial year as a whole – a bit worse than last year when the figures were flattered by a couple of one-off factors. |
| Ministers will doubtless say that they have cut the deficit by two-thirds from its peacetime high of more than £150bn in 2009-10, but the real story is that repairing the hole in the public finances after the financial crash is taking a lot longer than it did after previous recessions. | Ministers will doubtless say that they have cut the deficit by two-thirds from its peacetime high of more than £150bn in 2009-10, but the real story is that repairing the hole in the public finances after the financial crash is taking a lot longer than it did after previous recessions. |
| Seven years after the trough of the 1980-81 recession, the public finances were so strong that Nigel Lawson was able to cut the top rate of income tax from 60% to 40% and the standard rate from 27% to 25%. Seven years after the trough of the 1990-91 recession, Gordon Brown was running a budget surplus. | Seven years after the trough of the 1980-81 recession, the public finances were so strong that Nigel Lawson was able to cut the top rate of income tax from 60% to 40% and the standard rate from 27% to 25%. Seven years after the trough of the 1990-91 recession, Gordon Brown was running a budget surplus. |
| On current plans, it will not be until the middle of the next decade before the books are finally balanced. That’s not because the government has been less assiduous in implementing austerity measures than the administrations in the 1980s and 1990s. It is because the initial shock from the financial collapse was more severe and the subsequent recovery, in large part due to ill-timed and excessive austerity, has been much weaker. | On current plans, it will not be until the middle of the next decade before the books are finally balanced. That’s not because the government has been less assiduous in implementing austerity measures than the administrations in the 1980s and 1990s. It is because the initial shock from the financial collapse was more severe and the subsequent recovery, in large part due to ill-timed and excessive austerity, has been much weaker. |