Record tax take as public finances enjoy biggest surplus for nearly 20 years

THE public finances enjoyed their biggest surplus for nearly 20 years last month in a significant boost to ministers calling on the Treasury to loosen its fiscal corset.

Cabinet members such as Defence Secretary Gavin Williamson have been manoeuvring for more cash, building the pressure on Chancellor Philip Hammond to run the spending taps in the Autumn Budget in the wake of a cash injection for the NHS.

Today’s Office for National Statistics data fuelled their cause after a £2 billion surplus for July, the best since 2000 in a month traditionally boosted by self-assessment income tax receipts.

Self-assessed receipts jumped £1 billion to an all-time record of £9 billion, leaving the overall surplus almost twice as high as the £1.1 billion predicted by City economists.

The deficit for the four months of the financial year so far was £12.8 billion, down more than £8 billion on last year as the government coffers benefit from record employment and consumer spending holding up for now.

The surplus leaves Hammond on course to significantly undershoot the £37.1 billion deficit forecast by his watchdog, the Office for Budget Responsibility, for the full fiscal year. Capital Economics’ Ruth Gregory said: “If the reduction in borrowing is sustained, borrowing would undershoot the OBR’s 2018/19 forecast by £13 billion or so.”

Almost a decade of austerity has cut borrowing in the aftermath of the crisis and Hammond is aiming to balance the books by the middle of the next decade.

But the Chancellor is also said to be wary of opening the spending floodgates just months away from the UK’s exit from the European Union.