July is usually a good month for the balance of UK government finances since many self-employed people submit the second of their self-assed tax payments to the Treasury that month. This often allows the Treasury to enjoy a surplus of cash in July rather than needing to borrow to balance the national books. This July, the surplus has doubled from last year’s mark to £2 billion – its healthiest surplus in 18 years.
Borrowing for the year to date has amounted to £12.8 billion (when politicians want to impose cuts or other forms of austerity they refer to this as “living beyond our means”). The current level of borrowing (at this stage of the year) is the lowest since 2002. Inevitably, this re-opens the debate between those who think current austerity measures should be curtailed in order to boost growth and provide cash for cash-strapped public sector bodies and other needy causes (such as the NHS, education, road building, defence etc). However, the Office for Budget Responsibility is still predicting full-year borrowing of just over £37 billion.
Supporters of austerity (and apparently there are some) argue that the nation needs to become independent of borrowing to fund “current account” activities and indeed should be running a balance of payments surplus. The national debt is currently approximately £1.8 trillion (1.8 thousand billion pounds), so the idea of making significant inroads into paying down the national debt through austerity is completely fanciful. The debt is equivalent to 84.3% of UK GDP.
The July windfall came from £9 billion in tax receipts from the self-employed which was £1 billion up on the same period in 2017. It does mean that the Chancellor of the Exchequer will have more room for manoeuvre when he delivers his budget later in the year.