LONDON, Reuters) - Britain posted a smaller-than-expected budget surplus in July as government expenditure rose, underlining budget constraints on new Prime Minister Boris Johnson as he promises to boost spending ahead of Brexit.
The surplus, excluding state-owned banks, stood at 1.319 billion pounds, compared with 3.562 billion pounds in July 2018, official data showed on Wednesday.
This was well below the median forecast of 2.7 billion pounds in a Reuters poll of economists.
July is traditionally a surplus month for the public finances, driven by income tax payments from individuals.
While most tax receipts were up a little compared with a year ago, government spending was 2.6 billion pounds higher, a 4.2% annual increase. Purchases of goods and services and staff costs drove most of the rise.
For the first four months of the financial year starting in April, Britain has borrowed 16.0 billion pounds, up 60% compared with a year ago although the deficit as a share of the economy remains small compared with a decade ago.
In the longer-term, the outlook for the public finances is clouded by Brexit and uncertainty around government spending.
Prime Minister Johnson has made billions of pounds of new spending commitments in his first few weeks in office, even before the potential costs of a disruptive, no-deal Brexit are taken into account.
Ratings agency Moody's said on Aug. 1 that some of the announcements raised "further questions about the government's commitment to addressing the legacy of debt bequeathed by the financial crisis."
Finance minister Sajid Javid will give more details of the plans soon, before a full annual budget later in the year - assuming that a no-confidence vote in the government and an election do not intervene before then.
The Office for National Statistics said sales and income tax receipts were up slightly compared with a year ago, but corporation tax revenue for the first four months of the 2018/19 fell 0.1% -- the first drop for any comparable April-July period since 2013/14.
Johnson declined during his leadership campaign to back the government's existing fiscal rules, which aim to keep the deficit below 2% of GDP during normal economic times, and ensure debt falls as a share of GDP.
Javid has said he will respect this rule but the government has said the longer-term future of the fiscal rules is "under review".