Britain's borrowing ballooned by another £12.4bn last month, but tax receipts rose year on year as the economic recovery gathered pace, official figures revealed yesterday.
The Office for National Statistics (ONS) said borrowing in the 11 months of the year so far had hit an all-time high of £131.9bn.
But there was welcome news for the Government as yesterday's figures revealed that tax receipts rose by 3.6% — the largest rise since April 2008. Tax receipts have now risen for three out of the last four months after a series of revisions to previous figures, according to the ONS.
It said the February rise to £42.6bn came as a result of the pick-up in economic activity and the reversal in the VAT reduction.
Receipts from VAT, which was hiked from 15% to 17.5% at the start of the year, rose 30% to £6.9bn last month. Yesterday's figures and the revision to January borrowing will fuel expectations that full-year borrowing will undershoot the Government's grim forecast for £178bn. Revisions announced yesterday have trimmed net borrowing by £2.9bn in the financial year to date, largely due to changes in tax receipt estimations. Lower than feared levels of unemployment are also thought to be helping limit borrowing.
Wednesday’s UK jobless data showed a surprisingly big cut in the numbers claiming jobseeker's allowance last month, with the so-called claimant count down to 1.59 million after a fall of 32,300 — the biggest monthly reduction since the end of 1997.
The ONS data today showed net debt of £857.5bn in February, equivalent to 60.3% of gross domestic product. The UK's current budget deficit rose by £6bn, taking the deficit so far this financial year to £94.7bn, which is the highest since records began. ING economist James Huntley said it looks increasingly likely that borrowing will be under the £178bn full-year forecast made by the Chancellor in the Pre-Budget Report last year.
He added: “This perhaps gives Mr Darling some room to offer something to the electorate at the March 24 Budget. However, with ratings agencies and financial markets eager to see action on the deficit he is unlikely to offer very much.”