Surplus in public sector finances
Gordon Brown looks set to meet his public sector borrowing targets as new figures show there was a healthy budget surplus last month.
According to the Office for National Statistics (ONS), public sector finances had a surplus of £4.1 billion last month, compared with a £0.4 billion deficit in October 2004.
Much of this improvement resulted from a significant increase in corporation tax income, with firms paying a total of £8.2 billion in tax, compared with £6.7 billion in the same month last year.
The chancellor now looks well on course to meet his public sector net borrowing (PSNB) forecast of £31.9 billion, providing him with a major boost ahead of his pre-Budget report due next month.
Howard Archer, chief UK economist at analysts Global Insight, said: “The October public finance figures provided very welcome news for the chancellor as his December pre-Budget report looms.
“No doubt, the chancellor will point to October’s robust tax take as vindication of his continuing message that ‘there is no need for tax rises based on the spending plans that we have’.”
However, even taking into account last month’s surplus, the public sector budget is still showing a £10.8 billion deficit over the first ten months of the year.
“Despite October’s stellar performance, the chancellor still seems unlikely to be able to get the current budget deficit down to the targeted £6 billion for the whole fiscal year from £18.9 billion in 2004-05,” Mr Archer added.
Economists have also warned that the figures for October could be misleading, as many firms pay corporation tax on a quarterly basis, providing an artificial gloss to the overall surplus.
Opposition politicians have warned repeatedly that the chancellor will miss his public sector spending targets this year, forcing him to raise taxes.
Mr Brown will publish his pre-Budget report on December 5th.
