I thought this Article taken from the times was interesting and wondered what other think:

August 21, 2003

Shopaholics help boost VAT take to record 7bn
By Lea Paterson



THE amount of VAT collected by the Government leapt to a high of 7 billion last month, with strong consumer spending providing the public purse with a timely boost. There was also a surprise increase in the corporate tax take to nearly 4.5 billion, with total tax receipts higher than analysts forecasts.

The unexpected resilience of tax receipts helped the Government to achieve a budget surplus of 1.5 billion for July. However, with spending racing ahead, analysts said that Gordon Brown was still very likely to breach his borrowing targets for the year.

July is always a bumper month for tax receipts and last month the Government collected almost 38 billion from the taxpayer. This was larger than the 31.6 billion spent in July, putting the Government in the black for the first month so far in this financial year.

Income-tax receipts for the month were 12.7 billion, 6.6 per cent above their level in July 2002. Corporation tax receipts were up 1.7 per cent on the year to 5.47 billion, while the VAT take rose almost 14 per cent over the year to a high of 7.1 billion.

The higher-than-expected tax take was seen in the City as a sign that the UK economy was picking up.

Nevertheless, analysts remained pessimistic about the outlook for borrowing as government spending last month was more than 7 per cent above its level at the same time last year.

The City believes the Treasury will exceed both the 27 billion borrowing target it has set for this financial year and the 24 billion pencilled in for the 2004-2005 financial year.

Jonathan Loynes, of Capital Economics, said: We stick to our forecast that borrowing will hit 34 billion this year, some 7 billion above Mr Browns Budget forecast, but the risks of an even higher number are growing.

John Butler, of HSBC, said: Receipts are holding up but departmental outlays are considerably higher than the same period a year ago. The message from this is that we expect the Treasurys Budget deficit forecast will prove far too optimistic and are looking for over 35 billion, or around 3 per cent of GDP.

The Governments preferred public finance measure, known as public sector net borrowing (PSNB), was 1.5 billion in surplus in July. This was less than half the 3.3 billion surplus seen in the same month last year.

In the financial year to date, the government deficit is 12.6 billion, according to the PSNB measure. This compares with a deficit of 6.8 billion for the same period last year.

The alternative public sector net cash requirement measure of borrowing posted a surplus of 6.2 billion in July, down from 6.8 billion in the same month last year.

Net debt outstanding at the end of July was 344 billion, or about 31.3 per cent of GDP.

I suggest we all take on board thirse paragraphs from page 46 of todays Economist.

"With Inflation out of its box the central bank (i.e.) BOE can do little to help 9sic) the downturn in the economy, and may indeed have to raise interest rates to show its inflation-fighting resolve.

Coming on top of the erosion of consumers purchasing power by soaring oil and food prices the housing slump looks set to inflict some hefty collateral damage"

In other words (imo & dyor) Share prices in property, building, retail, automotive, leisure, food producers, household goods, and support serives all have a LOT FURTHER TO FALL and some will never recover.

Views, thought ets PLUS if the great commodity super-cycle is not a super-cycle but a bubble then where?