Corporation tax take breaks record

Surging company profits generated a record inflow of corporation tax into the treasury's coffers last month, according to official figures published yesterday, underlining the healthy state of the public finances.

With the financial sector making a particularly large contribution, corporation tax payments totalled £11.3bn in October, a record for a single month. The surge in corporation tax, together with below-target government spending, helped the treasury record a surplus on the current budget of £9.1bn.

In the financial year to date its books are in the black by £6.9bn, well ahead of the treasury's full-year forecast of £100m. The picture of a buoyant economy was reinforced by separate figures showing that retail spending rose in October at the strongest rate for two years.

The office for national statistics said sales volumes increased by 0.5% compared to September to stand 4.7% higher over the year. The data showed textiles, clothing and footwear sales rose 2.4% on the month and 7.4% over the year, while overall non-food sales were up 1.3% in October and 7.4% year-on-year.

In the latest three months compared to the previous quarter - a better guide to the underlying trend than volatile monthly figures - trade was up a robust 1.2%.

However, the increase in sales volumes continues to be gained through price cuts, with many retailers' margins being squeezed as a result.

Analysts said the Bank of England's monetary policy committee was likely to be reassured by the ongoing price sensitivity of consumers, but they warned that it might still decide to raise interest rates again to ensure the economy does not overheat.

Mortgage lending has fallen from its summer peak. Total gross lending in October was £10.4bn compared with £10.8bn in September and August, but was still "much higher" than a year ago, and continues to paint a picture of a strong housing market, said the Council of Mortgage Lenders.