The Office for National Statistics (ONS) has published statistics for January revealing public accounts were in surplus after a bumper rise in income tax receipts.
The £3.74bn public sector net borrowing (PSNB) surplus - the largest since July 2008 (January 2010 recorded a deficit of £1.27bn) - beat City forecasts and provided a shot in the arm for the government this week.
The January surplus, combined with the ongoing moderation of public sector growth, puts the coalition on track to meet full-year forecasts set out in the emergency budget.
The larger-than-expected surplus should help the government meet its target for borrowing for the financial year to March 2011 of £148.5bn. Total public borrowing for the fiscal year to date currently stands at £113bn, £14.1bn lower than at the same point last year.
In a statement Treasury said it would carry on with deficit reduction: “It’s welcome that this January saw the first surplus for the public finances in two years, but it will take more than one month in surplus to deal with borrowing of almost £150bn for this financial year.
“The government is determined to stay the course to deal with this unsustainable borrowing, and keep Britain out of the financial danger zone.”
John Whiting, tax policy director at the CIOT, commented: “I’m not surprised – if not in January then when are they ever going to be in surplus?
“It confirms the worst of the recession is over, but I think it says more about how bad January 2010 was. Back to prosperity? I don’t think so. How fast the recovery is, is perhaps a better question and what trajectory we’re on. We need February, March and April figures, after which we will also see the impact of the 20% VAT rate.”
About Robert Lovell
Business and finance journalist