UK posts record budget surplus in January, boosting Hammond before budget update
* January surplus of 14.9 bln sterling is highest on record
* Annual borrowing for 2018/19 on track for lowest since
2001/02
* Hammond to give updated budget forecasts on March 13
* Slower growth likely to raise borrowing in 2019/20, beyond
* Fitch puts UK on negative watch due to no-deal Brexit risk
(Adds reaction from economists, Fitch)
By David Milliken and William Schomberg
LONDON, Feb 21 (Reuters) - Britain posted its biggest budget
surplus on record in January despite a slowing economy, putting
finance minister Philip Hammond on course to announce the lowest
annual borrowing since 2002 in a fiscal update due just before
Brexit next month.
Britain ran a surplus of 14.895 billion pounds ($19.46
billion) in January, official data showed, the highest since
monthly records began in 1993 - and above all economists'
forecasts in a Reuters poll.
The budget deficit looks on track to drop to its lowest
since 2001/02 at just over 1 percent of national income this
financial year, down from a towering 10 percent just after the
global banking crisis in 2009/10.
The public finances have so far withstood the weakest
economic growth since 2012 last year, as worries over Britain's
planned exit from the European Union mounted and the global
economy slowed.
A 14 percent jump in income and capital gains tax payments
in January reflected earnings in 2017/18, when economic growth
was stronger.
Economists expect Britain's independent budget forecasters
to predict a rise in borrowing in the coming financial year when
Hammond gives his fiscal update on March 13, barely two weeks
before Britain is due to leave the EU.
Slower economic growth since Hammond made his full budget
statement in October is expected to push up borrowing
projections for the next couple of years.
But Hammond is still likely to have around 15 billion pounds
of headroom to meet his goal of keeping borrowing in 2020/21
under a self-imposed cap of 2 percent of gross domestic product
(GDP), said Samuel Tombs of Pantheon Macroeconomics.
Hammond, under pressure for more public spending after years
of austerity, has said he could use that headroom to ease any
Brexit shock to the world's fifth-largest economy.
"With (Other OTC: WWTH - news) the economic outlook highly uncertain at present, next
month's Spring Statement probably will be a holding operation,"
Tombs said.
NO-DEAL BUDGET RISK
A no-deal Brexit would throw all the forecasts out of the
window. Prime Minister Theresa May is still struggling to get
parliamentary backing for the transition deal she struck with
Brussels last year.
On Wednesday, Fitch Ratings said it could cut its double-A
credit rating for British government bonds due to the higher
risk of Britain crashing chaotically out of the EU.
For now, however, the budget figures look good.
Borrowing in the first 10 months of the 2018/19 financial
year came to 21.2 billion pounds, just over half the figure at
the same point in the previous tax year. Hammond looks set to
meet his goal of limiting borrowing to 25.5 billion pounds.
That said, the Office for Budget Responsibility, which
produces the forecasts that underpin Britain's budgets, said
there was "significant uncertainty" about the target.
Britons seemed to be paying income tax earlier this year,
accounting for some of January's revenue surge, it said.
Public debt is also falling as a share of gross domestic
product and is at its lowest level since May 2012 - excluding
distortions from a temporary Bank of England lending scheme - at
74.0 percent of GDP or 1.597 trillion pounds.
This debt is not unusual for advanced economies, though it
is double its share of GDP compared with before the financial
crisis, and the finance ministry worries that rising debt would
limit its room for manoeuvre in future crises.
($1 = 0.7656 pounds)
(Reporting by David Milliken and William Schomberg; Graphic by
Andy Bruce
Editing by Mark Heinrich)