Latest News

UK sees record monthly budget surplus, but tough picture ahead of budget


UK sees record monthly budget surplus, but tough picture ahead of budget By Reuters

Breaking News


Economic Indicators

Published Feb 21, 2024 07:14
Updated Feb 21, 2024 11:01

© Reuters. FILE PHOTO: People walk over London Bridge looking at a view of Tower Bridge in the City of London financial district in London, Britain, October 25, 2023. REUTERS/ Susannah Ireland/File Photo

By David Milliken and Suban Abdulla

LONDON (Reuters) -Britain chalked up its highest ever monthly budget surplus in January due to record seasonal tax inflows, official figures showed on Wednesday, although the broader picture remains tough as finance minister Jeremy Hunt prepares his annual budget.

The Office for National Statistics said Britain ran a budget surplus of 16.7 billion pounds ($21.1 billion) in January, up from 7.5 billion pounds a year earlier although below economists’ 18.7 billion pound forecast in a Reuters poll.

Britain’s public finances typically run a surplus in January, unlike other months, as annual income tax payments are due that month.

Hunt will present his annual budget on March 6, and wants to cut taxes in order to boost the governing Conservative Party’s popularity before the national election Prime Minister Rishi Sunak is expected to call later this year.

The Conservatives are heavily trailing the opposition Labour Party in opinion polls, and received a blow from official figures last week which showed the economy had fallen into a shallow recession in the second half of last year.

“January’s public finances figures delivered some much-needed good news for the chancellor in the lead-up to the budget. But we doubt this will pave the way for a big pre-election splash,” Ruth Gregory, deputy chief UK economist at consultants Capital Economics, said.

Gregory estimated that the government’s fiscal headroom – the amount of extra spending or tax cuts possible while staying within its self-imposed budget rules – had only risen to 15 billion pounds from 13 billion pounds at the time of a mid-year budget update in November.

Other economists gave slightly higher estimates, with the Resolution Foundation think tank pencilling in 23 billion pounds and accountants KPMG forecasting 21 billion.

Either way, this headroom is below average historic levels and is based on budget plans for a squeeze on stretched public services after the next election, which the government has given few details about.


Following Wednesday’s borrowing data, Hunt’s deputy, chief secretary to the Treasury Laura Trott, did not rule out further tax cuts in the budget, after reductions in November.

“While we will not speculate over whether further reductions in tax will be affordable in the budget, the economy is beginning to turn a corner,” she said.

Despite the government lowering some taxes in November, Britain’s overall tax burden has been rising, largely because thresholds for paying income tax have not been increased in line with wage growth or inflation.

“What Britain is being offered is really a ‘tax sandwich’,” Resolution Foundation research director James Smith said. “Juicy tax cuts in this election year are sandwiched between far bigger tax rises already introduced last year (and) a chunky package of tax rises that will come into effect after polling day.”

Since the start of the tax year in April, borrowing has totalled 96.6 billion pounds, down from 99.7 billion pounds in the first 10 months of the 2022/23 tax year and the first such annual fall this financial year, helped by an upward revision to earlier tax receipts.

It is also below the 105.8 billion pounds which the government’s Office for Budget Responsibility had forecast in November for this point in the tax year.

Central government revenue in January alone hit a monthly record of 111.4 billion pounds, up from 107.5 billion a year earlier.

Lower inflation has eased spending demands compared with a year ago, reducing debt interest payments – many of which are inflation linked – by 30% to 68.9 billion pounds for the year to date.

The longer-term picture for the public finances remains challenging, with overall public debt up sharply as a result of the COVID-19 pandemic, and roughly in the middle of the pack for large advanced economies.

Net debt on the government’s preferred measure, which excludes public sector banks and the Bank of England, was 2.418 trillion pounds or 88.1% of gross domestic product in January – down slightly from December but up from 85.0% of GDP a year ago.

($1 = 0.7924 pounds)

UK sees record monthly budget surplus, but tough picture ahead of budget

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning
Do not sell my personal information

© 2007-2024 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Nvidia Just Invested in These 5 Artificial Intelligence (AI) Stocks. Here’s the Best of the Bunch.

Previous article

UK factories report highest selling price inflation since July, CBI survey shows

Next article

You may also like


Leave a reply

Your email address will not be published. Required fields are marked *

More in Latest News