Corporation tax boost but UK surplus misses forecast

The UK’s public finances reached a lower-thanexpected surplus a month after the Brexit vote, despite a bumper haul from corporation tax receipts.

The Office for National Statistics said the surplus, which does not include public sector banks, hit £1 billion in July, down £200 million compared with the same month last year.

Economists were pencilling in a figure of £1.6bn.

Britain’s finances tend to enjoy a strong July as self-employed people pay their income tax and businesses settle their corporation tax bills.

The Treasury’s coffers were boosted by a 3.4% rise in tax receipts to £61.8bn last month, compared with July 2015.

The jump was fuelled by an 8.4% rise in corporation tax to £7.5bn – its strongest July since 2011 when it reached £8.6bn.

However, that was partly offset by a fall in tobacco taxes, which slipped 38% to £800m over the period.

Samuel Tombs, chief UK economist of Pantheon Macroeconomics, said July’s “relatively small surplus” means Chancellor Philip Hammond will only be able to muster a small package of measures to boost the economy in the Autumn Statement.

Mr Hammond previously indicated the Government could take advantage of the cheap cost of borrowing to push fresh investment into the UK in the hope of bolstering productivity.

The move would be a departure from the economic direction plotted by former Chancellor George Osborne, whose aim of achieving a budget surplus by 2020 was scrapped by Prime Minister Theresa May.

Despite July’s lowerthan-expected surplus, Government borrowing in the financial year to date made for brighter reading, as it fell £3bn to £23.7bn compared with April to July last year.

HSBC economist Elizabeth Martins said it was too early to point to the impact of the EU referendum result on the public borrowing figures, but she said the lower-than-expected surplus shows the “challenges the Government was already facing to meet its ambitious targets”.

She said it was unlikely the deficit would now meet the Office for Budget Responsibility’s forecasts for 2016/17.

Chancellor Philip Hammond.