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UK government posts unexpected budget surplus in January

UK government surplus Britain's Chancellor of the Exchequer Jeremy Hunt walks at Downing Street in London, Britain, November 17, 2022. REUTERS/Toby Melville
Chancellor Jeremy Hunt warns of 'tough choices' ahead to get UK government debt down from 60-year highs despite surplus. Photo: Toby Melville/Reuters (Toby Melville / reuters)

The UK government managed a surplus of £5.4bn in January, as tax receipts boosted the public finances.

The Office for National Statistics (ONS) reported a £5.4bn surplus for chancellor Jeremy Hunt in January ⁠— boosted by the highest January figure for self-assessment income tax receipts since monthly records began in April 1999.

Self-assessed income tax receipts hit a record £21.9bn, some £5.5bn more than in January 2022.

However, the £5.4bn surplus that the government managed was well below the £12bn surplus recorded in January last year.

January normally delivers a large surplus for the Treasury as income tax payments are due.

Public borrowing in the 2022/23 financial year so far rose to £116.9bn, some £30.6bn less than predicted by the Office for Budget Responsibility (OBR).

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However, interest on government debt hit £6.7bn in January, the highest amount for the month since records began in 1997.

The ONS said the recent increase in debt repayments was "largely" because of inflation.

Read more: FTSE 100: HSBC quarterly profit almost doubles boosted by rising interest rates

Chancellor Hunt said: “We are rightly spending billions now to support households and businesses with the impacts of rising prices ⁠— but with debt at the highest level since the 1960s, it is vital we stick to our plan to reduce debt over the medium term.

“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.”

The figures come as the government is set to deliver its budget next month.

The Treasury is “set for a £30bn fiscal boost ahead of next month’s budget”, according to Michal Stelmach, senior economist at KPMG UK.

He said: “Public sector net borrowing was in surplus by £5.4bn in January, a big fall from the £12.5bn surplus last year as the energy support package continues to exert pressure on the public finances.

“However, government spending on subsidies ⁠— which include the energy support ⁠— so far came in £6.8bn below the £44bn expected by the OBR this fiscal year, suggesting that milder weather and lower demand for gas have helped keep the cost down.

Read more: Tenants most likely to be struggling amid cost of living crisis

“Year-to-date borrowing has so far undershot the OBR’s forecast by £30.6bn, which could tempt the chancellor to offer a pay increase to public sector workers as part of his budget next month, hoping to prevent another wave of strikes.

“Looking ahead, we estimate that the Energy Price Guarantee is now likely to cost only around a half of the OBR’s £12.8bn forecast in 2023-24, thanks to lower wholesale energy prices. However, this will be largely offset by the new Energy Bills Discount Scheme for businesses with an estimated cost of £5.5bn, providing little near-term relief against a backdrop of wider spending pressures.”

Watch: Hunt to 'stick to plan' despite £30bn less borrowing in year to date than predicted

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