UK public finances go into surplus thanks to tax receipts

The public finances posted an overall surplus in July as higher taxes and the bank levy boosted government receipts, bringing overall borrowing this fiscal year down and bringing the government closer to its targets.

The Office for National Statistics said that public sector current budget swung to a surplus last month and net borrowing stood at -1.961 billion compared to a net borrowing of 1.350 billion pounds in July 2010.

The coalition government of Conservatives and Liberal Democrats has launched a tough austerity programme, including plans to cut public spending, in order to eliminate the country's budget deficit by 2015.

The gap totalled more than 10 per cent of GDP before they came into office in May 2010.

The government's preferred measure, PSNB excluding financial sector interventions, showed a minimal net borrowing of £20m.

PSNB-ex since the start of the tax year in April now totals 40.144 billion pounds – £2.922bn less than at the same point in 2010.

The ONS said that the new bank levy as well as higher receipts from self assessments and corporation taxes boosted government receipts. Local government's borrowing was also lower, though the ONS said this was unlikely to last.

The independent Office for Budget Responsibility forecasts that public borrowing excluding financial sector interventions will total £122bn during the current 2011/12 tax year, more than £20bn lower than in the previous year.

However, the economy has barely grown since last September and many economists doubt the government will meet its deficit target.