Chancellor Jeremy Hunt received a boost ahead of his budget on Tuesday as new figures showed the UK recorded a bigger than expected surplus of £5.4 billion last month.
After announcing record public sector borrowing of £27.4 billion in December, the UK’s public finances bounced back despite “substantial spending” on energy support schemes, record debt interest and one-off EU payments.
Although January typically delivers a surplus for the government as workers pay their self-assessed income tax bills, the figure was £5 billion larger than predicted by the fiscal watchdog the OBR. The Office for National Statistics said self-assessed income tax receipts were £21.9 billion last month — the highest January figure since monthly records began in April 1999.
Economists predicted the better economic news could give the Chancellor “some wiggle-room” in the Budget on March 15. But with some Conservative MPs pushing Mr Hunt to unveil tax cuts to boost economic growth, the Treasury warned against reading too much into the monthly data. Mr Hunt said: “We are rightly spending billions now to support households and businesses with the impacts of rising prices.
“But with debt at the highest level since the Sixties, it is vital we stick to our plan to reduce debt over the medium term so we can protect our public services.” The news came as a key business survey showed a much stronger than expected bounce in activity that will raise hopes the UK can avoid recession.
The closely watched UK PMI Composite Output Index surged to an eight-month high of 53 from 48.5 in January. Any reading above 50 points to growth.
Dr John Glen, CIPS chief economist, said: “The sun broke through in February after six months of gloom with a significant jump in output for business.”
