UK government runs unexpected budget surplus in January – ONS

LONDON  – Britain’s government ran an unexpected budget surplus in January, reflecting strong income tax receipts that could give finance minister Jeremy Hunt a little more leeway than he thought as he prepares his annual budget.

The Office for National Statistics (ONS) on Tuesday reported a seasonal budget surplus of 5.42 billion pounds ($6.51 billion) in January, a month in which millions of Britons pay their income tax receipts.

A Reuters poll of economists had pointed to public sector net borrowing, excluding state-owned banks, of 7.85 billion pounds for January.

The ONS reported self-assessment income tax receipts of 21.9 billion pounds, the highest January figure since monthly records began and 5.5 billion pounds more than last year.

“This suggests that the Chancellor will have some wiggle-room in the budget to fund near-term tax cuts and/or spending rises,” said Ruth Gregory, deputy chief UK economist at consultancy Capital Economics, of the January surplus.

But she warned that the Office for Budget Responsibility was likely to downgrade its estimates for Britain’s potential economic growth rate – something that would limit the scope for any unexpected giveaways by Hunt on March 15.

The figures, which are not adjusted for inflation, showed the tax receipts were offset by 6.7 billion pounds of interest payable on index-linked government bonds, the highest January total on record.

“Getting debt down will require some tough choices, but it is crucial to reduce the amount spent on debt interest so we can protect our public services,” finance minister Jeremy Hunt said in response to the data.

The government spent more than 10 billion pounds on its energy support for households in January, while it also paid 2.3 billion pounds to the European Union to settle a dispute over customs duties.

($1 = 0.8317 pounds)