UK sees July budget surplus since 2002

LONDON • Britain posted its first July budget surplus in 15 years last month as payments of self-assessed income tax poured in.

Revenue exceeded spending by £184 million (RM1.01 billion) compared to a deficit of £308 million a year earlier, the Office for National Statistics said yesterday. The median forecast in a Bloomberg survey was for a deficit of £1 billion.

It left the shortfall in the first four months of the fiscal year at £22.8 billion, up 9% on the year.

July is a good month for the public finances, with the Treasury receiving higher than normal receipts of income tax. Self-assessed receipts jumped 11% from a year earlier and there was also a boost from value- added tax revenue, which rose 5%.

But spending remains under pressure from higher inflation making interest payments on index-linked government bonds more expensive. Debt costs in the fiscal year-to-date rose by 23%, the biggest increase for the period since 2010. Spending is also being boosted by timing issues relating to payments to the European Union (EU), which have risen by more than half in the year to date.

Chancellor of the Exchequer Philip Hammond is hoping to limit borro- wing to £58 billion in the current fiscal year, as forecast by his budget watchdog in March. Borrowing in 2016-17 was £45.1 billion, revised down from a previous estimate of £46.2 billion.

The deficit has fallen from 10% of gross domestic product in 2010 to 2.3% last year. But while Hammond is pledging to balance the books by 2025, any shock to the economy from Britain leaving the EU could blow his fiscal plans off course.

July is also a big month for corporation tax, though receipts fell this month due to methodological changes that mean such payments are spread more evenly throughout the year.

A cash measure that determines bond issuance was in surplus by £6.9 billion last month. — Bloomberg