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UK shows biggest July budget surplus since 2000, easing spending headache for Hammond

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UK shows biggest July budget surplus since 2000, easing spending headache for Hammond
FILE PHOTO: Britain's Chancellor of the Exchequer Philip Hammond leaves 11 Downing Street in London, Britain, July 2, 2018. REUTERS/Simon Dawson   -   Copyright  Simon Dawson(Reuters)
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LONDON, (Reuters) – – Britain recorded its biggest budget surplus for the month of July in 18 years, official data showed on Tuesday, helping finance minister Philip Hammond as he prepares his annual budget statement later this year.

The surplus last month, excluding state-controlled banks, stood at 2.0 billion pounds, more than double the figure in July last year and well above a median forecast of 1.1 billion pounds in a Reuters poll of economists.

The improvement, which was driven by strong seasonal inflows of income tax receipts, took the deficit for the first four months of the 2018/19 financial year to 12.8 billion pounds, down 40 percent from the same period of last year.

Hammond has said fixing the public finances is his priority although he is under pressure to announce more spending in his budget in November after years of cuts in real terms to many areas of public spending.

Prime Minister Theresa May has already announced a relaxation of the government’s tight grip on public sector pay and more money for the health service.

Britain’s public finances have not been hit as hard as once feared by the impact of the 2016 Brexit vote because the economy has weakened less than many forecasters predicted.

Hammond’s predecessor as finance minister George Osborne inherited a deficit equivalent to nearly 10 percent of gross domestic product in 2010. It now stands at around 2 percent of GDP, in line with the deficits of many other rich economies.

Hammond has said he wants to bring down Britain’s still high public debt.

The ONS said debt, excluding public sector banks and the impact of the Bank of England’s stimulus programme, stood at 1.585 trillion pounds, or 75.2 percent of GDP, in July, the lowest share of economic output since August 2012.

Tuesday’s figures showed income and value-added tax revenues were up 6 percent in the first four months of the financial year and while corporation tax revenues rose by 2 percent.

Government spending, excluding investment, rose by only 1 percent. Investment spending was down 17 percent.

(Reporting by William Schomberg and David Milliken)

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