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UK public finances show unexpected weakness in January

LONDON, Feb 21 (Reuters) - Britain's public finances showed a much smaller than usual seasonal surplus in January, due to lower income tax and corporation tax receipts, as finance minister George Osborne prepares his annual budget.

Strong performance earlier in the financial year means that Osborne still looks on track for public sector net borrowing, excluding financial sector interventions and some other one-off effects, to fall as forecast in December.

But the figures mean that Osborne is unlikely to have any large windfall to play with just over a year before national elections in May 2015.

Other figures released by the Office for National Statistics on Friday showed an unexpectedly sharp fall in retail sales in January, which suffered their biggest monthly decline since April 2012 after a strong December. Sales on the year were 4.3 percent up, weaker than expected.

Britain's public sector finances, excluding financial sector interventions, showed a surplus of 4.718 billion pounds in January, down from 6.035 billion pounds on a comparable basis a year ago, which strips out one-off effects related to a transfer of debt interest from the Bank of England to the finance ministry.

Economists had forecast a surplus of 8.15 billion pounds.

For the year to date - stripping out the effect of cash transfers from Royal Mail (Other OTC: ROYMF - news) and the Bank of England - the deficit totalled 90.7 billion pounds, 4.2 percent lower than at the same point in 2013. The government's budget plans aim for it to be 3.1 percent lower over the 2013/14 tax year as a whole

Deficit reduction is the central economic policy of Britain's Conservative-led coalition, which came to power in May 2010 when Britain's budget deficit was 11 percent of annual economic output - one of the highest for a major economy.