Commenting on the latest public borrowing figures, showing that the Government ran a surplus of £1.3bn in July, Michael Martins, Economic Analyst at the Institute of Directors, said:
“The fact that the Government ran a surplus, for the first time since 2012, highlights the strength of the UK’s economic recovery. Much of this was due to the strong employment and wage growth we have seen in recent months.
“Tax receipts increased by 4.4% year on year, slightly better than expected, with income tax, national insurance, VAT and corporation tax all boosting the government’s coffers. On the other side of the coin, spending barely increased. These two trends enabled the Government to borrow 24% less than in the same period last year, putting the UK on track to reduce the deficit to a more manageable £67 billion.
“While these figures are positive, there is much hard work still to be done to put the public finances on a sound footing. Although the exact timing is uncertain, we know that a rise in interest rates is coming sooner rather than later. The less debt the UK accrues, the lower the debt interest payments that will need to be paid. This would free up funding for education and infrastructure investment, which IoD members value almost as much as deficit reduction.”
Figures from the Office for National Statistics show current tax receipts increased by 4.4% YoY, compared to the OBR predictions based on the Summer Budget of 4.1%. Broken down, income tax related receipts increased by £2.6 billion or 5.2% YoY, national insurance contributions increased by £1.7 billion or 4.8% YoY, VAT increased by £1 billion or 2.5% YoY, and corporation tax increased by £1.4 billion or 9.5% YoY. Expenditure increased 0.1%, coming mainly from increased pension outlays (increase of 1.3% YoY).