Public sector borrowing falls as income tax receipts hit record £11.5bn

If public sector banks are excluded then the public sector’s borrowings dropped to £9.4bn in June from £10.2bn in the month before, according to the Office for National Statistics, as levels of net investment were slightly higher.

The ONS said that income tax receipts in June rose by £300m to £11.5bn, the highest since records began in 1997.

Corporation tax was up almost 14% at £1.7bn, marking another record high.

For the first three months of the 2015/16 tax year, public sector net borrowing was 25.1 billion pounds, down almost 20 percent compared with the April-June period of last year and its lowest for the same period since the 2008/09 financial year.

Capital Economics senior United Kingdom economist Samuel Tombs said the Chancellor – who is giving evidence to the Treasury select committee today – could overshoot a newly-lowered borrowing target of £69.5 billion by around £2 billion if the trend continued.

Sumita Shah, ICAEW Public Sector Policy Manager, said: “The budget deficit continues to improve, and is a sign of a healthy economy”.

However the improvement of 19.6% is slightly behind the scale pencilled in by the OBR.

The figure included the addition of 100 million pounds in debt relating to a revision of debt levels at Network Rail, a railway company.

A Treasury spokesman said: ‘Today’s figures show that our deficit reduction plan is working, with cumulative borrowing over £6billion lower than at this point previous year. However, economists had forecast a figure of £8.5bn.

‘However, estimates for borrowing in the first few months of the fiscal year should be taken with a pinch of salt, ‘ he added.

“Accordingly, we do not think that June’s borrowing figures should ring any alarm bells yet”.

“However, we must not understate the big challenges that the United Kingdom faces in restoring stability to our public finances”, he added.

‘Therefore, we have to continue to focus on other means to tackle the deficit – including cutting current government spending.’.