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| UK government surplus gives Philip Hammond pre-budget boost | |
| (about 13 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 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. | The 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. |
| The rise in tax income generated a surplus of £9.4bn, the highest January gain since 1999, prompting the Treasury’s independent forecaster to say the government was on track to undershoot the £68bn deficit target at the end of the financial year. | The rise in tax income generated a surplus of £9.4bn, the highest January gain since 1999, prompting the Treasury’s independent forecaster to say the government was on track to undershoot the £68bn deficit target at the end of the financial year. |
| The Office for Budget Responsibility said official figures showing the deficit had tumbled to £49.3bn in the financial year so far and if the sequence of healthy figures continued could put it on course to hit £56bn by the end of March. | The Office for Budget Responsibility said official figures showing the deficit had tumbled to £49.3bn in the financial year so far and if the sequence of healthy figures continued could put it on course to hit £56bn by the end of March. |
| The OBR said the estimated £12bn improvement was likely to give “a reasonable sense of the extent to which borrowing is undershooting”. But it also warned that tax receipts remained volatile as investors considered how much income to bring forward to avoid higher taxes next year and the banks agreed the size of annual bonus payments. | The OBR said the estimated £12bn improvement was likely to give “a reasonable sense of the extent to which borrowing is undershooting”. But it also warned that tax receipts remained volatile as investors considered how much income to bring forward to avoid higher taxes next year and the banks agreed the size of annual bonus payments. |
| However, the surplus for January 2017 nudged only £300m higher than the same month last year, which was less than City economists had expected. | However, the surplus for January 2017 nudged only £300m higher than the same month last year, which was less than City economists had expected. |
| 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 the £55bn level foreseen in March last 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 the £55bn level 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. | “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. | “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.” | “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. | 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. | “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. |
| In November the OBR said the weaker economic outlook since the Brexit vote meant its March 2016 prediction of the public deficit was way off the mark and revised it to £68bn for the current financial year. | In November the OBR said the weaker economic outlook since the Brexit vote meant its March 2016 prediction of the public deficit was way off the mark and revised it to £68bn for the current financial year. |
| But a strong recovery in the months after the referendum put Britain in the front rank of developed world economies and forced many forecasters to revise up their predictions of growth for 2017. | But a strong recovery in the months after the referendum put Britain in the front rank of developed world economies and forced many forecasters to revise up their predictions of growth for 2017. |
| The Treasury, which has abandoned former chancellor George Osborne’s target to create a surplus in the public finances in this parliament, said the deficit would continue to fall. | The Treasury, which has abandoned former chancellor George Osborne’s target to create a surplus in the public finances in this parliament, said the deficit would continue to fall. |
| A 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 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.VAT receipts increased by 3.7% in January on the same month last year and corporation tax receipts rose 5%. | 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.VAT receipts increased by 3.7% in January on the same month last year and corporation tax receipts rose 5%. |
| 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. |