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Surplus narrows in January as Chancellor prepares for Budget

The figures mean that Chancellor Rishi Sunak might struggle to increase spending while sticking to fiscal targets in his March budget, experts said.

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The taxman collected nearly £23 billion in self reported and capital gains tax in January (PA)

The taxman collected nearly £23 billion in self reported and capital gains tax in January (PA)

The taxman collected nearly £23 billion in self reported and capital gains tax in January (PA)

Britain racked up a lower budget surplus in January even as the Government raked in a hefty tax bill.

Government coffers swelled by £9.8 billion in the first month of the decade, the Office for National Statistics said.

It is, however, a reduction of £2.1 billion compared to last January’s surplus, the ONS added.

Government borrowng: financial year to January
(PA Graphics)

“Today’s data paints a mixed picture for public finances. With just two months to go until the fiscal year end, overall borrowing for the fiscal year to March is projected to fall below £50 billion,” said Yael Selfin, chief economist at KPMG UK.

“Despite that relatively good news, if the Chancellor intends to stick to the current fiscal targets, he will have relatively limited room to increase spending compared to the ambitious objectives the government has set.”

The public purse often overflows in the beginning of the year as people pay their self-assessed tax bills.

UK national debt
(PA Graphics)

Most income tax comes straight out of earners’ wages.

However those with other income must report this in a tax return.

A total of £22.7 billion of self-assessed income and capital gains tax was paid to the taxman in January this year, £1.3 billion more than last year.

It brings national debt to almost £1.8 trillion at the end of January this year, or 79.6% of gross domestic product (GDP), which is the value of all goods and services produced every year in the UK.

It is a 0.7% point reduction in the level of debt to GDP, showing that production is increasing faster than debt.

“The difference between central government’s income and spending makes the largest contribution to the amount borrowed by the public sector,” the ONS said.

The central Government had a £11.9 billion surplus last month, while local government borrowed £2.4 billion, while public corporations borrowed £200 million.

The Bank of England also contributed £700 million to the country’s surplus.

Chancellor Rishi Sunak will unveil his Budget in March.

PA