U.K. Posts Surplus as Bank Surcharge Boosts Corporation Taxes

  • Surcharge on bank profits adds GBP300 million to tax take
  • Fiscal year-to-date deficit falls 11% compared with year ago

The U.K. posted a surplus in July as the government’s tax take was boosted by the first payments under a surcharge on banks introduced last year.

Government income exceeded spending by 977 million pounds, compared with 1.17 billion pounds a year ago, the Office for National Statistics said in London on Friday. Receipts rose 3.4 percent, while spending was up 1.3 percent.

Income was boosted by an 8.4 percent jump in corporation tax to 7.5 billion pounds. Half of the increase was due to the U.K.’s Bank Corporation Tax surcharge of 8 percent. That was introduced last year by former Chancellor of the Exchequer George Osborne to offset a cut to a separate levy on banks.

The figures conclude a week of data on the U.K. economy that appear to suggest the immediate impact of the Brexit vote hasn’t been as severe as some anticipated. Still, with the outlook now more uncertain since the referendum, Chancellor Philip Hammond has hinted he’ll implement some fiscal stimulus later this year to complement the Bank of England’s easing.

Any change to the fiscal stance could be limited if a slowdown means a larger deficit for the government.

According to Dan Hanson, an economist at Bloomberg Intelligence, “with deficit reduction at the heart of the Conservative Party’s economic plan for so long, the choice to significantly amplify that deterioration may be unpalatable.”

July is usually a good month for the public finances, with the Treasury receiving higher-than-normal receipts of income tax and corporation tax. The corporation-tax receipts last month were the highest for a July since 2011.

The monthly numbers left the deficit in the first four months of the fiscal year at 23.7 billion pounds, down 11 percent on an annual basis. In the April-July period, government income rose 3.1 percent and spending was little changed.

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