The pressure on Britain’s creaking public finances has eased as a bumper tax haul in January saw the Government record the highest monthly borrowing surplus in more than two years.
Public sector net borrowing, excluding financial interventions by the Government, showed a surplus of £3.7 billion last month, a marked improvement on last year’s deficit of £1.3 billion, the Office for National Statistics (ONS) said.
January traditionally shows net repayments, as the deadline for the payment of self-assessment income and capital gains tax and corporation tax falls at the end of the month, but this was still the largest surplus since July 2008, the ONS said.
The figures will ease fears that borrowing is in danger of overshooting forecasts set by the tax and spending watchdog, the Office for Budget Responsibility (OBR), and could add weight to arguments against the size of the coalition’s package of austerity measures, which includes £81 billion-worth of spending cuts.
The figures come after US Treasury Secretary Timothy Geithner gave his backing to Chancellor George’s Osborne plans to reduce the budget deficit.
Total public borrowing for the year to date now stands at £113 billion, the ONS said, £14.1 billion lower than in the same period in the previous financial year.
The Government’s target, based on the OBR forecast, is £149 billion for the financial year to the end of March.
Samuel Tombs, UK economist at Capital Economics, said if the current trends continue, borrowing for the year could come in around £10 billion below the OBR’s forecast.
Mr Tombs said this would give the Chancellor “a little more wiggle room” at the Budget on March 23. He said: “Nonetheless, while the fiscal consolidation may have got off to a good start, we still think that the Government will struggle to meet its fiscal targets next year, primarily reflecting the slowing of the recovery to a very sluggish pace.”
Total tax receipts increased by 12.4% in January, the ONS said, the largest increase since last April. Income and capital gains tax receipts increased by 18.9% to £23.7 billion, a six-year high. Receipts for VAT, which was increased from 17.5% to 20% last month, rose by 8.4%, but this compared to January 2010 when there was also a VAT hike.