Bumper corporate tax returns boost government finances in July |
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Sat, 20 Aug 2005 06:05
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LONDON - Chancellor Gordon Brown was a relieved man yesterday after it emerged that the treasury received a better-than-expected surplus in July riding high on bumper corporate tax returns.
However, analysts continued to paint a gloomy picture and said that Brown was sure to miss the forecast made in March this year when he had predicted that public borrowing would reach £31.9 billion for the current fiscal year. Figures from the Office for National Statistics show that July was a good month for the treasury notwithstanding the horrific London bombings. Public sector net borrowing scaled a surplus of £2.9 billion as compared to £2 billion at the same time last year. This is a record surplus ever since July 1980, when the statistics were first recorded.
Current receipts were boosted by 9.1 percent to £43 billion. Corporation tax receipts soared by 21.4 percent as compared to last year's revenues. But this could still not prevent a deficit of £15.3 billion in government finances. This figure has grown worse than the £11.3 billion at a comparative stage last year.
However analysts are predicting that Gordon Brown might have to break his Golden Rule if he is to balance books this year. The rule is that "the government can only borrow if it needs to invest over the economic cycle." Shadow chancellor George Osborne hinted as much when he said, "These figures show why Gordon Brown had to move the goalposts to be sure he wouldn't break his own golden rule. If he'd left the rule alone ... he would only be able to borrow £1.5bn over the next eight months, seven times less than he borrowed over the same period last year."
Dominic Walley, a managing economist at the Centre for Economics and Business Research disagreed, "The figure still leaves the government on course for a whopping deficit. Based on the last three years' experience, this puts the expected deficit at between £40bn and £50bn by the end of the year," he said.
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