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UK books back in black but debt costs soar


Chancellor Philip Hammond has received a boost from official data showing public finances posted their first July surplus for 15 years.

The Government’s revenues outstripped its expenditure by £184m, the Office for National Statistics (ONS) reported.
That compared to a deficit of £308m in the same month last year – according to the underlying data, which strips out the impact of bailed-out banks.
Treasury coffers were boosted by a record level of self-assessment income tax receipts for July, though experts said this was a one-off due to the timing of the assessment deadline.
Economists were doubtful that it would give the Chancellor – under pressure over squeezed spending in the public sector – much leeway to loosen the purse strings in his autumn Budget.
Meanwhile, corporation tax receipts weakened compared with a year ago and the cost of interest payments on the Government’s £1.8tn debt mountain totalled £4.9bn, up 18% year-on-year.
That was because the interest on payments is linked to inflation, which has climbed sharply thanks to the pound’s collapse in value since the Brexit vote – which makes imports more expensive.
The ONS also revised down the level of borrowing for the last financial year to £45.1bn thanks to revisions by HM Revenues and Customs increasing the estimate of tax received.
For the financial year to date, borrowing is running at £22.8bn, £1.9bn or 9% higher than for the same period last year.
But that is a slower rate than the 29% increase in borrowing to £58.3bn for the year to next March pencilled in by the independent Office for Budget Responsibility (OBR).

The surplus figure for July beat the consensus view of economists, who expected to see a widening deficit.
Howard Archer, chief economic advisor to the EY ITEM Club, said the figures would be welcomed by the Chancellor.
He added: “While a struggling economy and higher interest debt payments look likely to weigh on the public finances, there’s a good chance that the Chancellor will have a little wiggle room in November’s Budget.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The first July surplus since 2002 is not a signal that the economy is in rude health.
“We continued to doubt that the Chancellor will pare back the fiscal consolidation planned for the coming years.”
The Treasury said it was making good progress in improving public finances, but that the national debt was still too high.
Britain has been steadily cutting back its deficit – as a percentage of GDP – since it reached 10% in 2010, and it fell close to 2% in the last financial year.
But this is expected to widen again in the current financial year.
Mr Hammond has not committed to balance the budget until the middle of the next decade, giving him some flexibility to ease the pace of deficit reduction if needed to support the economy as the UK leaves the European Union.

Source: Sky

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