Danni Hewson, AJ Bell financial analyst, comments on the latest public sector finance figures.
“Furlough has been a vital but expensive tool. Its wind up helped curb government spend in July, with the cost 75% less than the same period last year and payments for the self employed having dwindled to nothing. Borrowing in the month almost halved compared to last July and the amount of cash coming in to boost the coffers has risen by nearly £10bn. Though the treasury is still spending beyond its means it is an improving picture and a fall in inflation has sliced a £5.4bn chunk off debt interest payments compared to the previous month, though at £3.4bn it’s a number that requires watching.
“But the numbers are going the right way; looking at money coming in since the start of the financial year almost every box is in the black. Corporation tax take is up 15%, Fuel duty nearly 50% and tax from self-assessment up a whopping 148%. The economic engine is purring, but keeping it ticking over during lockdowns and restrictions has taken its toll and the road ahead is unlikely to be pothole free. Any chancellor will have to become adept at tightrope walking for years to come. Lean too far, spend to little and there is a real danger that parts of the economy that have been pummelled the most will struggle. Tip the other way and the country might not get back in shape quickly enough to deal with the next big shock.
“Recovery is faster and stronger than had been expected, borrowing is coming in well below anticipated levels. But markets will tell you we’re not out of the woods yet. COVID is still causing disruption and even in parts of the world where the vaccine rollout is more advanced there is concern about what the autumn months may bring.”