UK public finances run up unexpected deficit

The UK's public finances posted an unexpected deficit in July, exposing the government's failure to reign in spending.

July is typically a good month for the public coffers, as it is the time of year when high taxes on income and wealth are recorded from self assessment and quarterly corporation tax returns. Indeed, tax receipts increased by 3.4 per cent this year, above budget forecasts of a 3.0 per cent rise.

But corporate tax receipts, which have pushed the UK into surplus for the past two years, fell by 1.4 per cent to £7bn.

The Office for National Statistics said the UK had a £62m deficit in July - compared to a £823m surplus the previous year. Excluding the effect of a deal between the Treasury and Bank of England last year to credit public finances with net income earned by the Bank on the government debt it owns, net borrowing was even worse at £488m.

Public sector net debt hit £1.193 trillion in the month - equivalent to 74.5 per cent of gross domestic product (GDP).

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