Surging tax take sends UK to first July budget surplus in 3 years
LONDON – Britain’s public finances recorded their first July surplus in three years, as the country’s economic upturn spurred the strongest income tax receipts for the month since records began in 1997.
Finance minister George Osborne welcomed Friday’s official figures, which also showed July was the 12th successive month of falling year-to-date public sector net borrowing, excluding banks.
Public finances have traditionally been in surplus in July, but tepid wage growth in the previous two years depressed the usual surge in payments from individuals filing self-assessed income tax returns.
The Office for National Statistics reported a public finance surplus, excluding banks, of 1.29 billion pounds ($2 billion) in July, almost exactly as forecast in a Reuters poll.
State coffers were boosted by 18.5 billion pounds of income tax receipts — the biggest intake for July on record — and up almost a billion pounds compared with a year ago.
Economists said the figures suggest the government could undershoot its borrowing forecast for the year of 69.5 billion pounds — or 3.7 percent of economic output.
“If this trend persists over the remaining eight months of the fiscal year, this year’s deficit would be 67 billion pounds,” Samuel Tombs, economist at Capital Economics said.
“Even so, with eight months of the fiscal year still to go and often large revisions to early borrowing estimates, it is too soon to conclude that the Chancellor is meeting his fiscal plans with room to spare and could therefore reduce the scale of the austerity measures set to hit the economy.”
British wages have risen far more slowly in recent years than before the financial crisis. A move back towards historical wage hikes is one of the considerations for the Bank of England before it starts to tighten policy.
A separate survey on Friday showed annual pay rises in Britain remained stuck at 2 percent in the three months to July, with little sign they will pick up soon.
Among other ONS figures, public sector net borrowing totalled 24.0 billion pounds in first four months of the 2015/16 tax year, down 23 percent compared with the April-July period of last year.
In the 2014/15 financial year, the deficit stood at 4.9 percent of gross domestic product, half its level in 2010 when Osborne’s Conservative Party first took power, but still bigger than the hole in the finances of most other advanced economies.
Public sector net debt, excluding state-controlled banks, was 1.505 trillion pounds in June, equivalent to 80.8 percent of GDP.
Osborne is aiming to start bringing the ratio down in the 2015/16 financial year after it rose sharply following the financial crisis. -Reuters