News ID: 167154
Published: 0644 GMT August 19, 2016

Small July surplus could limit Hammond's fiscal reset for UK

Small July surplus could limit Hammond's fiscal reset for UK

Britain's public finances showed a smaller-than-expected budget surplus in the first month after the vote to leave the European Union, potentially limiting the ability of new Chancellor Philip Hammond to give the economy a big boost later this year.

Britain ran a budget surplus-excluding state-owned banks-of nearly 1 billion pounds last month, lower than the almost 1.2 billion pounds in the same month last year, leaving it off track to meet its current fiscal targets, Reuters reported.

Economists in a Reuters poll had expected revenues to exceed spending by 1.6 billion pounds.

Samuel Tombs, an economist with Pantheon Macroeconomics, said tax revenues grew below the projections that underpin Britain's current budget plans for a fourth month, leaving little wiggle room for Hammond to spend more or cut taxes.

"July's relatively small surplus means that the chancellor will be able to put together only a modest package of measures to support the economy in the Autumn Statement later this year," Tombs said in an email to clients.

Hammond has said he will move more slowly to turn the deficit into a surplus than his predecessor George Osborne and might "reset" fiscal policy at the end of 2016, depending on how the economy copes with an expected "Brexit" slowdown.

Official figures released earlier this week showed no impact on consumer demand from the vote to leave the EU and little hit to the labor market in July. But economists say it remains too early to gauge the longer-term effect of the vote.


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