CHANCELLOR Philip Hammond has received a summer boost as new figures showed Britain had posted a small budget surplus in July for the first time in 15 years.
However, numbers from the Office for National Statistics[ONS] also showed the UK Government’s borrowing for the current financial year had risen to £22.8 billion. Public sector net borrowing, excluding public sector banks, increased by £1.9bn between April and July, compared to the same period in 2016.
This was despite the increase in tax receipts in July, which helped deliver a small surplus for the Exchequer of £200 million last month.
Britain's finances tend to enjoy a strong July as self-employed people pay their income tax and businesses settle their corporation tax bills.
Receipts from self-assessed income tax increased by £0.8bn to £8.0bn year on year in July, the highest level on record.
The ONS said last month's surplus was the first since July 2002 but experts warned that this could be a one-off and the general picture was not so rosy.
"The first July surplus since 2002 is not a signal that the economy is in rude health," insisted Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
He said the jump in self-assessment tax receipts last month was down to "unusually low" comparative figures in July 2016 as last year's deadline for payments fell on a weekend and instead bolstered August figures.
The ONS said public sector net debt excluding public sector banks, climbed by £143.9 billion to £1.76 trillion compared with July 2016, the equivalent to 87.5 per cent of gross domestic product.
However, Howard Archer, chief economic advisor to the EY ITEM Club, said July's figures might still be regarded as a "welcome boost" for Mr Hammond, who now had a "very decent chance" of undershooting his fiscal target for 2017/2018.
"While a struggling economy and higher interest debt payments look likely to hamper the public finances over the coming months, the Chancellor does look to have a very good chance of having some wiggle room in November's budget.
"Any November wiggle room for the Chancellor will be welcome given that increased public dissatisfaction with austerity and on the public sector pay cap has put pressure on the Government to recalibrate fiscal policy," Mr Archer added.
The ONS said Government borrowing excluding public sector banks decreased by £27bn to £45.1bn in the previous financial year to March 2017.
That marked the lowest net borrowing figure since the financial year ending March 2008.
The numbers also managed to undershoot the Office for Budget Responsibility’s forecast of £51.7bn.
The OBR is expecting a £13.2bn increase in Government borrowing for the current financial year to £58.3bn.
Sterling was trading 0.5 per cent lower versus the US dollar at 1.283 in the wake of the data's release but was flat against the euro at 1.091.
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