Oil boosts public finances

Tax from soaring oil prices has boosted public finances for July, official statistics have revealed.

About £4 billion of the £9.9 billion of corporation tax paid to the government in July was from North Sea companies, more than twice as much as in July 2007.

The increase meant government receipts in July stood at £52 billion, up from £50.6 billion last year.

As a result, this month saw a slight improvement in public finances, with a budget surplus of £6.6 billion.

The budget surplus made a slight improvement in the government's net debt - falling from 38.3 per cent of GDP in June, to 37.3 per cent in July.

However, over the year to date public sector net borrowing stands at £19.1 billion compared with £8.4 billion over the financial year to July 2007.

Charles Davis, an economist for the Centre for Business and Economic Research, said: "Going forward, the outlook remains challenging for government. With borrowing and debt on a clear upward trend and the economy set for a period of minimal growth and even contraction, public finances look susceptible to further unscheduled borrowing.

"The Treasury forecast of growth in the range 2.25 to 2.75 per cent in 2009 now looks hopelessly optimistic - suggesting public finances could be stretched particularly in 2009."

Under rules introduced by Gordon Brown as chancellor in 1997, public sector net debt should be no more than 40 per cent of national income.