MNI BRIEF: OBR: Rosier UK Finances Distorted By Timing Effects

The Office for Budget Responsibility (OBR) warned that the better-than-expected public finance data for August, published Friday, has been distorted by timing effects caused by the settling of tax arrears.

In response to the Covid crisis the Treasury set up deferral schemes for value added tax and self-assessment tax liabilities. The OBR had anticipated that there would be heavier take up of these schemes and later repayments than has occurred. This entails that less tax is owing down the line, raising doubts over how sustainable the pick up in tax receipts will be.

OBR noted that while receipts in the first five months of the 2020-21 fiscal year, through August, were down by GBP69.9 billion, 26 per cent, on the same period a year ago they were 12 per cent up on the OBR's central scenario. The OBR also warned that current data were prone to larger than normal revisions.