THE government's finances were back in the black in July, but the (pounds) 1.49bn surplus in the month on its net borrowing measure will not be enough to save chancellor Gordon Brown's blushes over his full-year borrowing forecast, according to economists.
Better-than-expected levels of corporation tax, income tax and VAT helped swell the public sector net borrowing figure, which gives an underlying picture of the public coffers.
Brown has forecast a deficit of (pounds) 27bn for the current financial year. Despite the surplus in July, economists do not expect Brown's forecast to be met.
Jonathan Loynes, chief UK economist at Capital Economics, said the surplus in the public sector net borrowing figure was due to it being a ''strong seasonal month'', pointing out that July is one of the four months in the year when corporation tax receipts are strongest. Corporation tax is paid on a quarterly basis, boosting the coffers in January, April, July and October. This time (pounds) 5.5bn flowed into the public coffers, compared to (pounds) 5.4bn last July.
He noted that July is also the second biggest month for income tax receipts, due to it being one of the two months of the year when taxpayers that assess their own tax actually make payments. Income tax receipts were stronger this July than last year, mainly due to rising employment. VAT inflows also jumped to a single-month record of (pounds) 7.1bn, up from (pounds) 6.2bn last July.
Loynes added: ''Compared to a normal July it was not a strong month.'' He pointed out that the surplus was less than half the (pounds) 3.3bn surplus of July last year, and the (pounds) 3.8bn in 2001.
Asked whether Brown would miss his borrowing forecast of (pounds) 27bn for this year, Loynes said: ''I think that is very likely. Borrowing figures are already almost double that of last year. If you carry on in this path, borrowing could be upwards of (pounds) 40bn. It probably won't be quite that bad, but I think somewhere in the mid-(pounds) 30bn range is highly likely.''
The data showed a deficit for the first four months of the fiscal year of (pounds) 12.6bn, almost half Brown's forecast for the full-year and up from the (pounds) 6.8bn shortfall for the same period last year.
Additionally, National Statistics reported a surplus on the public sector net cash requirement, the difference between government spending and receipts, of (pounds) 6.4bn in July compared with a hefty shortfall of (pounds) 10.1bn in June.
Receipts were up a total of 3.7% in cash terms for the first four months of the year but spending ballooned 12%, which is the key reason why Brown is expected to bust his borrowing target.
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