Government records £9.4bn surplus in January


The surplus was still not as high as economists had predicted, falling significantly lower than consensus expectations of a £14.4bn surplus during the month.

According to the Office for National Statistics (ONS), public sector net borrowing fell to £49.3bn during the current financial year, while public sector net borrowing met a surplus of £9.4bn in January. Under the previous system, the budget surplus in January would be 15.2 billion pounds, the biggest since records began in 1997.

Ross Campbell, ICAEW public sector director said that average net national debt is expected to grow to just under £2trn in the next five years, the highest level of public indebtedness seen since the aftermath of a major world war.

A spokesman for the Treasury said policymakers remained "committed to returning the public finances to balance and building on our progress in reducing the deficit from 10pc to 4pc of gross domestic product (GDP) over the last six years".

Philip Hammond presents his Budget on 8 March, and the chancellor will base his budget calculations on updated figures on growth and borrowing supplied by the OBR.

U.K. Chancellor of the Exchequer Philip Hammond signaled in November a new fiscal course, after nearly a decade of belt-tightening, saying he expected billions in extra borrowing over the next few years to support an economy widely expected to slow as the U.K. exits the European Union.

It said the OBR will amend its outlook after seeing a bigger haul from tax receipts and a stronger performance from United Kingdom gross domestic product (GDP) in the fourth quarter of 2016.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said the Government was on course to undershoot the OBR's predictions, but expects the UK's finances to "deteriorate" in the final two months of the financial year.

"The ONS has decided this month to shift to recording corporation tax receipts when the economic activity that generated them occurred, rather than when they were received by the Exchequer".

The latest figures - which exclude the impact of state-backed banks - mean that for the first ten months of the financial year, borrowing stood at £49bn, down 22% on a year earlier.

Richard Godmon, partner and head of tax at Menzies, said that, while the corporation tax rate is already planned to reduce to 17% in 2020, further changes should not be ruled out.

The Office for Budget Responsibility estimated in November that this would bring a £2.5bn revenue windfall in January.

January is one of the few months in the year when the public finances are usually in surplus, because a large chunk of income taxes are paid.



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