Tax receipts rose 12 per cent or £6.2 billion on last year following June’s increase in capital gains tax from 18 per cent to 28 per cent, the bank bonus tax and January’s VAT hike to 20 per cent which added almost £700 million to the Treasury.
Government spending was just £1.9 billion higher than a year ago, but is predicted to be nearly £150 billion for the financial year.
Self-assessment returns jumped from £10.3 billion to £14.4 billion although this was attributed in part to smart accounting by some businesses and high-earning individuals avoiding the imminent 50 per cent tax rate.
The Government seized on the good news as confirmation that an economic recovery is underway although the full impact of forthcoming job cuts has yet to hit the economy.
Various surveys recorded a widespread lack of consumer confidence compounded by fears of redundancy, mortgage interest rate increases, continuing price increases and falling value of wages ahead of Chancellor George Osborne’s March budget.
News that the Government will not now press ahead with its earlier plans to stop banks offsetting their 2008-09 losses during the financial crisis against tax due on recent profits – after taxpayers paid to rebuild their balance sheets – contributed to a popular mood of discontent.
The Government’s strategy has been to ride out the criticism with very little fundamental or structural change to how banks operate. Mr Osborne, speaking at a G20 meeting, admitted that British households had been particularly harshly hit by inflation because of the decline in value of sterling but said this had been inevitable because of the size of the country’s indebtedness.
US Treasury Secretary Timothy Geithner, at the same event, praised Mr. Osborne’s plan to eliminate the structural deficit by the end of this parliament in 2015 through massive cuts. The United States government is embarked on the exact opposite economic policy, printing money to ensure economic stimulus.
Meanwhile, Britain was said to be one of 12 countries at extreme risk of being unable to sustain its public finances according to a Fiscal Risk Index published by a City financial analysis firm, Maplecroft.
It claimed the Britain’s ageing population and high public debt – up from 43 per cent of gross domestic product in 2006 to 77 per cent in 2010 – meant it had unaffordable public spending commitments, putting it at 10th in a list of 163 countries, up from 27th last year.
Italy topped the same table, followed by Belgium, France, Sweden, Germany, Hungary, Denmark and Austria. Japan came ninth, the only non-European country rated “extreme risk”, with Finland 11th and Greece 12th.
