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Bumper tax receipts swell public finances in January UK government surplus gives Philip Hammond pre-Budget boost
(about 3 hours later)
A boost in self-assessment tax receipts and a bumper flow of capital gains tax to the exchequer has sent the government’s borrowing bill to its lowest January level in 17 years.A boost in self-assessment tax receipts and a bumper flow of capital gains tax to the exchequer has sent the government’s borrowing bill to its lowest January level in 17 years.
The boost to income generated a surplus of £9.4bn, the highest January surplus since 2000.The boost to income generated a surplus of £9.4bn, the highest January surplus since 2000.
However, the surplus for January 2017 was only £300m higher than the same month last year, which was less than City economists had expected.However, the surplus for January 2017 was only £300m higher than the same month last year, which was less than City economists had expected.
The latest data means the budget deficit for the year – the difference between tax income and government spending – is 21.6% lower than the same time last year.The latest data means the budget deficit for the year – the difference between tax income and government spending – is 21.6% lower than the same time last year.
In the financial year to date, since last April, public sector net borrowing declined by £13.6bn to £49.3bn, compared with the same period in the previous financial year. The data excludes public sector-owned banks such as Royal Bank of Scotland.In the financial year to date, since last April, public sector net borrowing declined by £13.6bn to £49.3bn, compared with the same period in the previous financial year. The data excludes public sector-owned banks such as Royal Bank of Scotland.
The modest boost is expected to put the chancellor, Philip Hammond, in a position to ease some of the Treasury’s planned austerity in the next financial year when he stands up to deliver his first full budget in a fortnight. The modest boost in January’s tax receipts is expected to put the chancellor, Philip Hammond, in a position to ease some of the Treasury’s planned austerity in the next financial year when he stands up to deliver his first full budget in a fortnight.
In November the Office for Budget Responsibility, which provides the Treasury with independent forecasts, said its March 2016 prediction of the public deficit of £55bn was way off the mark and revised it to £68bn for the current financial year.
Yael Selfin, chief UK economist at KPMG, said the stronger January public finances figures could see government net borrowing well below the OBR’s November figure, though it was unlikely to sink back to levels foreseen in March last year.
“This gives the chancellor a bit more room for manoeuvre in his final spring budget next month. If the UK economy remains stable over the transition period once article 50 is triggered, Hammond could meet his objective to reduce the budget deficit below 2% GDP by 2020-21, while offering a few small giveaways.
“These could include alleviating the burden on some small businesses impacted by rising business rates, and providing additional support to public services that are under increasing strain, such as the NHS, social care and education.
“However, in these uncertain times, the chancellor is likely to hold some ammunition back, in case the economy proves weaker in the run up to UK’s departure from the European Union, so more significant policy announcements are not likely before the autumn budget in November.”
Suren Thiru, an economist at the British Chambers of Commerce, was also sceptical that Hammond would plan any major giveaways in the next budget.
“Over the long term, the task of restoring public finances remains significant. If UK growth becomes more sluggish, as we expect, the UK will find it increasingly challenging to generate the tax receipts needed to deliver real progress in cutting the deficit,” he said.
A Treasury spokesman said: “We remain committed to returning the public finances to balance and building on our progress in reducing the deficit from 10% to 4% of GDP over the last six years. Next month the chancellor will deliver his spring budget based on updated forecasts from the OBR.”A Treasury spokesman said: “We remain committed to returning the public finances to balance and building on our progress in reducing the deficit from 10% to 4% of GDP over the last six years. Next month the chancellor will deliver his spring budget based on updated forecasts from the OBR.”
The public finances were also bolstered by a rise in corporation tax receipts, though the effect was disguised by a switch in the way the ONS accounts for payments by firms.
The Office for National Statistics said self-assessed income tax and capital gains tax receipts increased by £2bn to £19.8bn in January compared with January 2016, pushing the total to the highest January since 1999, when records began.The Office for National Statistics said self-assessed income tax and capital gains tax receipts increased by £2bn to £19.8bn in January compared with January 2016, pushing the total to the highest January since 1999, when records began.