The public purse headed into the black last month despite the poor performance of the #economy.
The VAT rate of 20 per cent, good corporation tax receipts and the tax levy on banks saw Government income hit a surplus of £2 billion in July. A small rise in National Insurance contributions also helped.
In the first four months of the current financial year, net government borrowing was a little over £32 billion. This represents a £3 billion decline in borrowing compared with a year ago.
Ross Walker of Royal Bank of Scotland added: “At face value it’s a better than expected outturn. It’s quite an important figures as July is a key month for corporation tax receipts. It’s the first big inflow for 2011. The issue is that with expectations for growth deteriorating sharply, the risk of a hit to tax receipts have increased. But at least as things deteriorate, we’re starting from a strong point.”
There wasn’t, however, unanimity amongst analysts about the ability of the Government to meet its budget deficit reduction targets.
Samuel Tombs of Capital Economics said: “July’s public finance figures suggest that the trend in borrowing has improved a bit, but not enough to leave the government on track to hit the fiscal forecasts for the year as a whole.”