Gordon Brown gets public finances boost

Soaring company tax receipts pushed Britain's public finances sharply into the black in October, a welcome boost for Chancellor of the Exchequer Gordon Brown ahead of his pre-budget report next month.

The Office for National Statistics said yesterday there was was a public sector net cash repayment of £5 billion last month, the highest surplus for October since 2001 and nearly four times the amount economists had predicted.

The government's preferred accruals-based measure was also better than expected with public sector net lending at £2.2 billion, the highest October surplus since 2002 and compared with forecasts of a deficit of £1.2 billion.

"The lucky Chancellor strikes again," said Angus McCrone, senior economist at the Centre for Economics and Business Research.

"Just a fortnight before a pre-budget report to Parliament that looked as though it would be very awkward for Gordon Brown, he is blessed with much better-than-expected figures on the public finances."

The figures come at crucial time for Mr Brown - who looks closer than ever to succeeding Prime Minister Tony Blair - just when the gloss appeared to be coming off his economic record.

The improvement was driven by a massive 23.4 per cent annual jump in company tax receipts, as North Sea oil companies have reaped record profits from high oil prices.

Analysts said there may be a further surge in January, the other key month for receipts, with the FTSE-100 index of leading shares racing to a four-year high on Thursday and the Treasury also working hard to close tax avoidance loopholes.

Public sector net borrowing for the financial year so far is at £20.884 billion, nearly £5 billion lower than at the same time a year earlier and compared with a full-year forecast of £31.9 billion.

"The cavalry, in the form of a surge in corporation tax, looks to have come to the Chancellor's rescue ahead of the PBR in just over a fortnight's time," said Ross Walker, UK economist at RBS Financial Markets.

"The Chancellor is now on course to meet his PSNB forecasts."

Mr Brown is due to deliver his pre-budget report on December 5 amid growing accusations the public finances are running out of control and that taxes will eventually have to rise by around £10 billion a year.

The Treasury, however, has been long predicting that a pick-up in corporate revenues meant borrowing would remain on track despite the slowing in the economy over the past year.

"Today's figures show a further strengthening in the public finances and we continue to meet our fiscal rules," a spokesman said after the data were published.