February 21, 2017 / 9:37 AM / 2 years ago

UK finance minister Hammond closes in on budget goal after strong January tax inflows

LONDON, Feb 21 (Reuters) – - British finance minister Philip Hammond appears to be on track to meet his first budget deficit target after a strong tax payments in January, reflecting the economy’s resilient response to last year’s Brexit vote.

Britain's Chancellor of the Exchequer Philip Hammond arrives at the National Cyber Security Centre in London, Britain, February 14, 2017. REUTERS/Hannah McKay

Official data showed Britain reported its biggest surplus on record in the public finances for January which is typically when a lot of tax revenues flow into the public coffers.

The Office for National Statistics reported a surplus in the public finances of 9.4 billion pounds last month.

That was smaller than a forecast for a surplus of 13.8 billion pounds in a Reuters poll of economists.

But the figure was distorted by a change in the way the ONS accounts for corporation tax revenues which it is now smoothing over the financial year.

Under the previous way of accounting for corporation tax flows, the surplus would have stood at 15.2 billion pounds in January, the highest since records began in 1997.

In the first 10 months of the financial year, the deficit stood at 49.3 billion pounds, down 21.6 percent on the same period a year earlier.

Hammond is aiming to bring Britain’s budget deficit - one of the biggest among the world’s rich economies - down to 68.2 billion pounds - or 3.5 percent of gross domestic product - in the 2016/17 financial year which ends in March.

That target looks achievable based on the latest figures. In the February and March last year, the combined deficit stood at 8.7 billion pounds.

Detailing January’s figures, the ONS said income tax revenues jumped by an annual 6.1 percent in January to 32.2 billion pounds, boosted by record payments by self-assessed individual income tax payers.

Corporation tax revenues, which are usually strong in January too, were up 5.4 percent at 4.2 billion pounds.

The ONS said under its previous methodology, corporation tax revenues in January would have been 10.1 billion pounds.

Reporting by William Schomberg and Alistair Smout

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