Bumper tax receipts push July public finances in the UK to £1.3bn surplus

UK Chancellor George Osborne hailed a bumper month for tax receipts as the UK’s public sector finances posted a July surplus for the first time since 2012.

The surplus – excluding the effect of bank bailouts – stood at £1.3bn last month, lower than expected but still a reversal compared to borrowing of £100m for the same period in 2014.

Treasury coffers were boosted after seeing the best July for income tax related receipts since records began in 1997, generating £18.5bn in revenues.

The figures from the Office for National Statistics (ONS) mean borrowing for the fiscal year-to-date since the start of April now stands at £24bn - £7.3bn, or 23.3%, lower than it was at the same point last year.

It suggests performance on cutting the deficit is running ahead of the latest independent forecast by the Office for Budget Responsibility (OBR) that it should fall by 21.1% for the full 2015/16 period.

Samuel Tombs, senior UK economist at Capital Economics, said: “July’s UK public borrowing figures show that the public finances are now benefiting fully from the economic recovery’s strength.”

Before the recession, July had regularly seen a surplus, averaging £3bn, thanks to corporation tax receipts, he added. But if last month’s trend continued, the full-year deficit could undershoot the OBR forecast by around £2bn.

However, with eight months of the fiscal year to go it was “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”, Mr Tombs said.

The Chancellor said: “With more tax coming in this month than the Government spent, borrowing so far is almost £71 or £72bn lower than last year.”

He said the recovery was “well established” but reiterated with debt at more than 80% of gross domestic product (GDP) “the job is not done”.

ONS figures showed a £900m, or 5.3%, improvement in income tax related payments for July compared to the same month last year, taking them to £18.5bn. VAT and corporation tax receipts were also up.

Underlying public sector net debt, at £1.51trn or 80.8% of GDP, was slightly down on June. But it was higher than in July last year when it stood at £1.43trn, or 79.7% of GDP.