Britain posted the smallest budget deficit for any June since 2008 as tax revenues from personal incomes and corporate profits surged.

Net borrowing excluding public-sector banks was £9.4 billion (€13.5 billion) compared with £10.2 billion a year earlier, the Office for National Statistics said on Tuesday in London.

Government income rose 4.4 per cent and spending increased 2.9 per cent. Chancellor of the Exchequer George Osborne set out his plan for fiscal tightening earlier this month, implying a smoother path than the Tories pledged before the election.

With cuts to government departments set to be less severe than expected, Bank of England officials including Governor Mark Carney have been signalling that the time is approaching to raise the key interest rate as inflationary pressures in the labour market build.

The increase in government revenue last month was led by taxes on incomes and corporation tax, with both at records highs for the month. Only stamp duty on property purchases fell.

In the first three months of the fiscal year, the deficit stood at £25.1 billion, down 20 per cent from £31.3 billion a year earlier. The measure used to calculate how much the Treasury needs to borrow in the financial markets showed a deficit of £17.7 billion in June. The figure includes £2.4 billion from the sale of shares in Lloyds Banking Group and Royal Mail.

Net debt rose to a record £1.51 trillion, or 81.5 per cent of gross domestic product. The figure was boosted by new data from Network Rail.

Bloomberg