The government was in the happy – and unusual – position of being in the black in July. To the surprise of the City, tax receipts were higher than public spending. Not by much, but a surplus is still a surplus even if in the context of a £1.8tn economy it is small change.
This, though, was a classic case of one swallow not making a summer. For a start, the deficit in the first four months of the financial year – a much better guide to the trend than a single month’s figures – was higher this year than last.
Moreover, despite strong growth in employment, PAYE receipts last month were only 1.6% higher than in July 2016. That is entirely consistent with an economy in which workers struggling to secure a decent pay rise are not paying very much tax.
The first July surplus since 2002 was an improvement on a small £400m deficit in July 2016. But close examination of the Office for National Statistics data suggests that was the result of an £800m jump in receipts from self-employment.
As a number of analysts pointed out, in 2016 the deadline for the self-employed fell on a weekend, with the result that many payments were not processed until August. To judge whether there has been any real improvement in self-employment receipts we will have to wait for the August data to come out.
The bigger picture is this. On current trends, the public finances are likely to be in the red by about £50bn for the 2017-18 financial year as a whole – a bit worse than last year when the figures were flattered by a couple of one-off factors.
Ministers will doubtless say that they have cut the deficit by two-thirds from its peacetime high of more than £150bn in 2009-10, but the real story is that repairing the hole in the public finances after the financial crash is taking a lot longer than it did after previous recessions.
Seven years after the trough of the 1980-81 recession, the public finances were so strong that Nigel Lawson was able to cut the top rate of income tax from 60% to 40% and the standard rate from 27% to 25%. Seven years after the trough of the 1990-91 recession, Gordon Brown was running a budget surplus.
On current plans, it will not be until the middle of the next decade before the books are finally balanced. That’s not because the government has been less assiduous in implementing austerity measures than the administrations in the 1980s and 1990s. It is because the initial shock from the financial collapse was more severe and the subsequent recovery, in large part due to ill-timed and excessive austerity, has been much weaker.
Former Lloyds boss may have a case, but what can he gain?
Eric Daniels was running Lloyds Bank when it received a £20bn bailout from the UK taxpayer in 2008. The 66-year-old American was chief executive when the high street lender was up to its neck in the protection payment insurance scandal, the mis-selling of which has so far cost Lloyds £18bn in compensation. He left the bank with a £5m pension pot in 2011 but, as the PPI bills mounted, had a £1.45m bonus for 2010 pared back to £300,000.
As tends to be par for the course, Daniels subsequently picked up a portfolio of new jobs: here a role with a boutique investment bank, there a non-executive directorship with a private equity firm. He has been doing all right for himself and could have decided to continue living in lucrative obscurity.
Instead, Daniels has decided to sue his former employers for a bonus – running into hundreds of thousands of pounds – that he says he should have received for hitting performance targets. Daniels can certainly afford the very best legal advice and he has no doubt been told that, by the terms of his contract, he has a case.
But unless Lloyds decided to settle quietly out of court, it is hard to see what Daniels expects to gain from his action. Even if he is right by the letter of the law, he is wrong in every other way.
The public was disgusted by the way in which the bankers behaved before, during and after the financial crash – and understandably so. There was a sense, as ordinary voters paid for the mistakes and malfeasances of the City, that the financiers simply didn’t get it. Daniels’ decision to sue Lloyds suggests that they still don’t.
