Business

UK public finances show January surplus

Media playback is unsupported on your device
Media captionTreasury Minister Sajid Javid says the figures show that the government's plans are on track

The UK's public finances recorded a surplus of £11.4bn in January, £5bn higher than in the same month last year, according to official figures.

But corporation tax receipts were down 13.5%, said the Office for National Statistics.

January often records a surplus thanks to an influx of tax money from self-employed people and businesses.

Economists pointed out that it would still be difficult for the chancellor to meet his borrowing target this year.

Public sector net borrowing, excluding financial interventions, for the financial year to date is now £93.8bn. This is £1.5bn higher than at the same point a year earlier.

January's borrowing figures were better than many economists had expected, but they are flattered by a £3.8bn windfall which the government received from the Bank of England under a new agreement.

Under that arrangement, interest the Bank of England earns on holding government debt is transferred back to the Treasury. Stripping that out, the surplus was £7.6bn in January.

Treasury Minister Sajid Javid said the figures showed that the government's plans were "on track".

But Chris Leslie, shadow financial secretary to the Treasury, said: "Strip away the smoke and mirrors, like the transfer of cash from the Bank of England, and underlying borrowing so far this year is rising and is £5.3bn higher than the same period last year.

"A flatlining economy means the government is borrowing more to pay for economic failure as the welfare bill is up."

Responding to the figures, the Office for Budget Responsibility (OBR) said: "The proceeds from the 4G spectrum auction will reduce borrowing by £2.3bn in the remainder of the year. Nonetheless, to meet our Autumn forecast would now require much stronger growth in tax receipts in the last two months of the year than we have seen since December, or much lower-than-forecast expenditure by central or local government."

The OBR is forecasting that public sector net borrowing for the year to April 2013 will be £119.9bn, but some analysts believe the chancellor will overshoot this by some way.

Rowena Crawford, senior research economist at the Institute for Fiscal Studies, said borrowing for the year was on track to be £7bn more than the OBR forecast thanks to increased spending on welfare benefits and public services administration.

If this spending growth continues over the next few years, while growth in tax receipts remains low, "then the large planned fiscal tightening might need to be increased", she said.

'Disappointing'

Public sector net debt - the total amount the country owes - stood at £1.16 trillion in January, up from £1.07tn in the same month last year.

Media playback is unsupported on your device
Media captionShadow Treasury minister Chris Leslie: "The deficit is going up"

This means that as a percentage of gross domestic product, public sector net debt has risen from 69.9% to 73.8%, a rise of almost four percentage points.

James Knightly, an analyst at ING, warned that although January's figures looked promising, the "the underlying story isn't quite as good. The UK's AAA rating remains under threat and with economic activity remaining subdued and tax revenues disappointing, Chancellor Osborne has little wiggle room when he presents his annual Budget next month."

And David Kern, chief economist at the British Chambers of Commerce, said: "While income tax and VAT receipts show a healthy 4% growth in January this year, corporation tax receipts recorded a decline of 13% when compared with January 2012.

"The large decline in corporation tax receipts highlights the need to support growing companies with the ability to make profit, and the lack of finance available to these companies must be urgently addressed."

Related Internet links

The BBC is not responsible for the content of external Internet sites