Treasury sees first July surplus since 2012

George Osborne said "the job is not done" over the economy. Picture: AP

The surplus – excluding the effect of bank bailouts – stood at £1.3 billion last month, lower than expected but still a reversal on borrowing of £100 million for the same period in 2014.

Treasury coffers were boosted after seeing the best July for income tax related receipts since records began in 1997, generating £18.5bn in revenues.

The figures from the Office for National Statistics mean that borrowing for the fiscal year since the start of April now stands at £24 billion – £7.3bn or 23.3 per cent per cent lower than at the same point last year.

It also suggests that performance on cutting the deficit is running ahead of the latest independent forecast by the Office for Budget Responsibility (OBR) that it should fall by 21.1 per cent for the full 2015-16 period.

Samuel Tombs, senior UK economist at Capital Economics, said that, before the recession, July had regularly seen a surplus, averaging £3bn, thanks to corporation tax receipts.

However, with eight months of the fiscal year to go, Tombs cautioned that it was “too soon to conclude that the Chancellor is meeting his fiscal plans with room to spare and could therefore reduce the scale of the austerity measures set to hit the economy”.

The Chancellor said: “With more tax coming in this month than the government spent, borrowing so far is almost £7.5bn lower than last year.”

He added the recovery was “well established” but reiterated that, with debt at more than 80 per cent of gross domestic product (GDP), “the job is not done”.

ONS figures showed a £900m, or 5.3 per cent, improvement in income tax-related payments for July compared to the same month last year, taking them to £18.5bn. VAT and corporation tax receipts were also up.

Underlying public sector net debt, at £1.51 trillion or 80.8 per cent of GDP, was slightly down on June. But it was higher than in July last year when it stood at £1.43tn, or 79.7 per cent of GDP.