LONDON

Britain unexpectedly posted its first budget surplus for any July since 2002 according to official data on Tuesday, welcome news for finance minister Philip Hammond in what still looks likely to be a difficult financial year for the government.

The surplus in July stood at £184 million ($236 million), compared with last year’s 308 million pound deficit, the Office for National Statistics said, citing figures that exclude state-controlled banks.

The surplus was boosted by a 10.6-per cent year-on-year rise in self-assessed income tax receipts from individuals in July, a month that often sees a spike in these returns.

But the year as a whole looks less promising, as last year’s vote to leave the European Union has pushed up inflation and related borrowing costs, and led to slower growth since the start of 2017.

Total borrowing since the start of the financial year in April is 10 per cent higher than at the same point in 2016, and in March official forecasters predicted public borrowing would rise to 2.9 per cent of GDP in 2017/18.

This would be the first major break in deficit reduction since the Conservatives came to power after the worst of the financial crisis in 2010, when the deficit stood at just under 10 per cent. Last year borrowing fell to a 13-year low of 2.3 per cent of GDP.

While economists think Hammond is still on track to meet his borrowing targets for 2017-18, they warned that a weak economy could soon dent revenue streams like income tax.

“We expect that a degree of cyclical decline will show through in the (public finances) data in the months to come, if as we expect, unemployment begins to creep up,” said Philip Shaw, economist at Investec.

Britain’s economy suffered its slowest start to the year since 2012, with households feeling the strain from rising prices caused in part by last year’s vote to leave the European Union, and wage growth remains weak.

Separate figures from the Confederation of British Industry showed British manufacturing expanded strongly this month, although official data has yet to suggest the sector will seriously compensate for a slowdown in consumer spending.