Government posts shock budget surplus for July

Philip Hammond received an unexpected boost today with the news that Britain recorded a shock budget surplus for July.

In the same month last year, the government borrowed £300m more than it took in tax receipts. The Times says that "consensus figures among analysts" forecast the deficit would surge to as much as £1.5bn this year.

In fact the government took £200m more in tax than it spent last month, the Office for National Statistics says, quoting figures that exclude publicly-owned banks.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

It's the first time in 15 years that the UK has recorded a budget surplus for July.

The month is the "second-most important" of the year for tax receipts, as it's when most self-employed people make their payments on account towards their annual self-assessment bill.

Revenues from self-assessment income tax were the main reason for the improved figures last month as they were £800m higher than last year at around £8bn, says the BBC.

Corporation tax revenue is also traditionally strong in July but thanks to a new methodology that "smoothes" receipts over the whole year this fell slightly compared to July 2016, says Reuters.

Howard Archer, chief economic adviser at the EY Item Club, says the Chancellor now has a "very decent chance" of undershooting his 2017/2018 borrowing target.

Britain's public finances are far from out of the woods, however.

For the first seven months of the year as a whole, and after higher than expected borrowing in June, the government is £1.9bn, or nine per cent, further in the red than it was in 2016 with a cumulative deficit of £22.8bn.

Hammond is expected to use his autumn Budget to push back the date when the budget is projected to return to annual surplus to either 2026 or 2027, says the Times. This would mean a period of up to 26 years in the red since the last annual surplus in 2001.

It would mark the longest run of deficits since the Napoleonic era between 1793 and 1817. The country did not replicate that even in the world wars of the early 20th century.