Taxpayers Help Keep Brown's Sums On Track

by Robert Lee, Tax-News.com, London

22 August 2006

A surge in tax receipts helped the UK Treasury to a record monthly surplus in July, although the opposition remain unconvinced by Chancellor Gordon Brown's fiscal calculations over the longer term.

Provisional estimates of the UK's public finances in July show that the public sector had a current budget surplus of GBP8.4 billion last month - GBP4.4 billion higher than in the same month last year and the highest level since Brown changed the methods of calculating the public finances soon after becoming Chancellor in 1997.

Tax receipts rose by 11.4% last month to GBP48.2 billion, although critics of Brown's fiscal policy have pointed out that the figures are flattered somewhat by a one-off surge in self-assessment tax receipts, largely because the payment date fell on a Monday, whereas last year it was a Sunday.

In addition, the tax receipt figures were boosted last month by an accounting change that requires North Sea oil companies to pay corporation tax three times a year - July, October and the following January - instead of at quarterly intervals.

Nonetheless, value-added tax receipts appear to have shown little sign of being dented by an apparent surge in carousel fraud, despite official figures showing that fraudsters contributed GBP10 billion to UK export figures in the three months to the end of June. According to the Office of National Statistics, VAT receipts grew by 6.4% in the first four months of the year.

The figures mean that Brown is less likely to breach his cherished 'Golden Rule', which stipulates that public sector borrowing should only pay for investment and not recurrent spending, and reduces the likelihood of a tax increase to cover the overall public sector shortfall, as has been widely anticipated by many economists.

However, Conservative finance spokesman George Osborne said that July's figures show public sector net debt now at almost GBP40 billion higher than it was at the same point last year, putting long-term stability at risk.

"The Comprehensive Spending Review should be an opportunity to look at why this has happened, but Gordon Brown is so far refusing to look comprehensively at his own failed spending record," Osborne noted in a statement.

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