Rise in tax revenues suggests economy 'on the mend'

A 'tentative' increase in tax revenues earlier this year has led some experts to suggest the economy is on the road to recovery.

According to analysis by research group Capital Economics, tax revenues were on average 4.7% higher in February, March and April than in the same months last year.

Chief UK economist at Capital Vicky Redwood said;

‘After stagnating for much of 2012, tax revenues appeared to have picked up since the tail-end of last year,’

After the financial crisis of 2008 Britain’s tax revenues collapsed and public spending soared plunging the UK into recession.

The figures will be welcome news to the Coalition whose plans to cut the deficit have stalled amidst plans to borrow £120billion for a third year in a row this year due to weak growth.

However modest the increase in revenue, the figures have raised some hopes that the economic gloom is lifting.  According to Redwood; ‘A tentative pick-up in tax receipts has lent some support to the growing signs of economic recovery.’

Capital Economics remains the most pessimistic of the 38 forecasters monitored by the Treasury have penciled in growth of just 0.2%. But Redwood said: ‘It is certainly far more likely that GDP growth this year exceeds, rather than disappoints, our 0.2% forecast.’

Although Capital Economics have forecast growth of just 0.2% for GDP this year, they admitted that it was likely to exceed this and a number of other City economists have raised their growth forecasts in recent days following a flurry of better-than-expected economic news.

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