19th August 2016
The government finances found themselves in surplus in July of £1 billion, though expectations were for a surplus of closer to £2 billion. That brings public sector borrowing so far this financial year down to £23.7 billion, which is £3 billion better than in the same period last year.
The surplus in July is down to the timing of tax receipts. Many individuals make an income tax instalment in July, particularly the self-employed, and this coincides with quarterly corporation tax payments from companies, which normally makes July one of the bumper months of the year for the taxman.
While this is the first update on the state of the public finances after the referendum, one month’s data shouldn’t be taken in isolation, and it will take some time to see exactly how Brexit is affecting the public purse.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown says: “July is normally one of the bumper months for tax receipts, because HMRC gets a lot of payments of income tax from self-employed people, and also quarterly corporation tax payments from companies, which is why the government found itself quids in last month.
“Of course the elephant in the room is Brexit, and what effect this will have on tax receipts going forward, but so far the hard economic data has actually been pretty robust, though it’s obviously very early days.
“All economic indicators are imbued with greater significance nowadays because they are building up to the big event later this year, which is the government’s Autumn Statement. That’s when we’re going to find out whether the new Chancellor is going to turn austerity off, and turn the spending taps on, in a break with the fiscal policy course plotted by his predecessor, George Osborne. That could well see previous borrowing targets thrown out of the window, if the new government decides supporting the economy is more important than keeping a lid on debt.”