Public purse boosted as Government logs largest July surplus in 18 years
Chancellor Philip Hammond has been given cause to celebrate as official figures showed the Government logged its largest July surplus in 18 years.
Figures from the Office for National Statistics (ONS) show public sector net borrowing, excluding state-owned banks, was in surplus by £2 billion in July, £1 billion more than the surplus logged in July 2017.
Economists had been expecting a surplus of £1.1 billion.
This was the largest July surplus since the year 2000.
Government coffers were bolstered by receipts on self-assessed income tax, which are usually higher in January and to a lesser extent in July.
The figures also showed that the deficit, excluding banks, in the current financial year to date was £12.8 billion, which is £8.5 billion less than during the same period in 2017.
That covers the period between April to July this year.
Public sector net debt, excluding state-owned banks, increased by £17.5 billion to £1,777.5 billion in July, equivalent to 84.3% of gross domestic product (GDP).
Howard Archer, chief economic adviser for the EY ITEM Club, said that if the pattern observed over the past four months continues, public sector net borrowing excluding banks would come in at £23.7 billion for the full fiscal year.
That would be "substantially below the £37.1 billion shortfall expected", he noted.
At this rate, the Chancellor could scrap plans for further fiscal tightening over the next two years at the upcoming autumn Budget while keeping public finances on track, according to Pantheon Macroeconomics' chief UK economist Samuel Tombs.
"Public borrowing has remained on a sharp downward trend, creating scope for the Chancellor to pause the fiscal consolidation next year and still meet his self-prescribed targets," he said.
However, "faced with pressure from his own MPs to boost his party's opinion poll standing and the political imperative to show that the economy has prospered after leaving the EU in March 2019, we expect the Chancellor to use this scope to borrow more", Mr Tombs added.
"That said, with extra money already earmarked for the NHS, the scope for tax cuts is modest."
Mr Archer also said it was "unlikely" that public finances will be able to "sustain their current rate of improvement".
He said: "They have significantly benefited from muted Government expenditure so far in this fiscal year (up just 0.7% year-on-year during April-July).
"This can be significantly influenced by the timing of payments over the year, including to the EU."