The latest Exchequer figures will reassure the government that there will be some fiscal space in October’s budget, notwithstanding Brexit, although VAT remains a nagging concern.
Brexit itself came too early to have any real impact on the figures; it will be early October before we see whether there has been any change in consumer spending behaviour.
Slightly worryingly, the figures today show VAT receipts continuing to lag behind target. If this trend accelerates post Brexit, we could see the VAT figures falling further behind at the end of September. A resultant drop in VAT receipts could impact on the scope for tax cuts or spending increases in the Budget.
On the positive side, income tax figures remain on track, reflecting the strong labour market. Again, it will likely be some time before we see the impact of Brexit flowing through to the tax numbers.