Tax revenue surge cheers Chancellor

There was welcome news for the Government yesterday from figures showing that the public finances were in surplus in the last month before the election. Buoyant tax revenues mean the Treasury will be able to reduce its target for this year's public sector borrowing requirement (PSBR) in the Budget next month.

In a speech to the Confederation of British Industry tonight, Gordon Brown will promise to be tough on public spending and borrowing. He will say: "In my first Budget I will be looking to the long-term needs of the British economy. I will set tough rules for government borrowing and spending. I will publish a plan for deficit reduction over the medium term."

Yesterday also brought a survey showing consumer confidence has surged to its highest level for nine years in a bout of post-election euphoria. By far the biggest improvements occurred in Scotland and Wales, the two regions which voted all their Conservative MPs out of office.

The monthly survey of consumer confidence carried out by GfK for the European Commission shows a big jump in optimism about the economy and household finances in the fortnight immediately after the general election. The balance of optimists over pessimists was, at 6 per cent, the highest since August 1988.

Commenting on the results, Ben Sanderson of Nottingham Trent University said: "The latest survey suggests that New Labour means new confidence."

He said the figures indicated that consumers would probably spend rather than save the free share handouts from building societies this summer. Nearly a fifth said they planned big purchases during the next 12 months.

On top of this return of the feelgood factor, the run of favourable economic news inherited from former Chancellor Kenneth Clarke continued yesterday.

New figures showed that government revenues exceeded expenditure by pounds 36m in April. City experts had expected a shortfall of more than pounds 1bn.

Although caution is needed in drawing conclusions from the first month of the financial year, the trends suggest that the PSBR for 1997/98 could be much lower than the pounds 19bn forecast in last November's Budget.

The Treasury said special factors helped explain April's surplus. The sale of Ministry of Defence married quarters and the Housing Corporation loan book brought one-off reductions of pounds 700m each. The switch to quarterly VAT payments on account accounted for up to pounds 1bn of the pounds 1.4bn in total VAT receipts compared with last April.

A spokesman said the Chancellor was determined to see significant further progress before he could be confident that the public finances were on a sound long term footing.

Even so, yesterday's figures diminished expectations that Gordon Brown will opt to raise extra taxes in his first Budget, due next month.

"A significant downward revision to the Treasury's PSBR forecast in the forthcoming Budget seems certain," said John O'Sullivan, an economist at NatWest Markets.

Excluding the one-off asset sales, central government spending was about 1 per cent higher than a year earlier, well on target to meet the tough public spending plans set out in the last Budget and adopted by the new Government.

Tax revenues were 12.5 per cent up on the year, well ahead of the Treasury forecast. Apart from VAT, income tax and national insurance contributions are growing strongly, reflecting rising in employment.

There is clear evidence that the public finances are benefiting from the strength of the economy," said Jonathan Loynes at HSBC Markets. But he said borrowing remained too high for this stage of the economic cycle.

Comment, page 21

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions