The surplus was also smaller than the market consensus of £1.5bn. The German Federal Statistics Office revealed that producer prices in Germany have suffered a decline in July, compared to the corresponding month a year ago, as they were reduced by 2%, although the annual rate of change was smaller in contrast to June, were the fall in prices was 2.2%.
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The public finances were in surplus a month after the Brexit vote as the government earned more in tax income than it spent, but the performance was weaker than expected.
But it was partly offset by a fall in tobacco taxes, which slipped 38% to £800 million over the period.
Over the current financial year to date, April to July, the public sector has borrowed £23.7bn, £3bn less than the same four-month period in 2015.
United Kingdom government borrowing United Kingdom government borrowing.
David Gauke, chief secretary to the Treasury, said: “With the public finances in surplus in July, our economy starts from a position of strength to face any economic turbulence following the vote to leave the EU”.
Meanwhile, public sector debt stood at £1,604bn at the end of July, which is equivalent to 82.9% of the UK’s gross domestic product.
The UK’s new Chancellor, Philip Hammond, has indicated that he will take a more gradual approach to deficit reduction and will not be bound by the targets of his predecessor, George Osborne.
He added: “As we keep working to cut the deficit, we are well placed to handle any challenges and seize the opportunities as our economy adjusts”.
The data will offer some reassurance over budget trends immediately after the United Kingdom referendum outcome, but the Brexit vote impact will unfold over several months at least given the lags involved in spending and revenue.
“We are determined to build on our economic strengths to ensure Britain is a country that works for everyone”.
The Government saw national insurance contributions rise 6.9% to £9.7 billion in July, the ONS said. Corporation tax and income-tax related payments climbed 8.4 percent and 1.9 percent, respectively.
Taxes on interest and dividend payments surged by 79.9% to £1.8 billion. The central government, now Theresa May’s fledgling administration, required less capital in the second quarter of this year, in comparison to the same time period last year, by £5.1 billion to £22.2 billion. Any post-referendum impact may not be clear for some time, it said.
The Office for Budget Responsibility had estimated that the public sector will borrow GBP 55.5 billion during the financial year ending March 2017, which represents a reduction of GBP 19.8 billion on the financial year ending March 2016.
“Their numbers from the March 2016 Budget saw borrowing falling by £20 billion, or 26%”.
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Shadow chancellor John McDonnell said: “The UK economy needs immediate investment from the government, rather than sticking to the failed policies of George Osborne which have helped create the problem”.
