January UK budget surplus highest in four years
Official figures raise hopes of tax cuts in Budget
By CFOWorld.co.uk | CFO UK | Published 17:15, 21 February 12
The UK's budget surplus in January was the largest in four years, official figures showed on Tuesday.
The figures released by the Office for National Statistics eased fears over the UK's triple-A credit rating, with local spending cuts helping towards a net repayment of £7.5 billion in January, up from £5.2 billion for the same period in 2011. This was the highest repayment for any month since January 2008.
The figures suggest that government borrowing is likely to come in well below a planned £127 billion in 2011/12, or 8.4 percent of GDP.
The improvement in the finances was driven almost entirely by lower borrowing by local authorities, reflecting spending cuts in services such as refuse collection, while tax revenue grew at the same pace as spending by central government.
The Office for Budget Responsibility gave a cautious assessment of the data, saying it expected revenue from value added sales tax and tax on bankers' bonuses to be much weaker in the last two months of the fiscal year, while central government spending could yet pick up.
The figures could strengthen calls from within the Conservative Party to cut business taxes and from the Labour Party to cut VAT from 20 percent.
Data on Friday is expected to confirm the economy shrank by 0.2 percent in the final three months of 2011 and, although there are now signs of a rebound, output could drop again in the second quarter due in part to public holidays for the Queen's diamond jubilee celebrations.
The Treasury said the data showed its measures were on track. "Our credible deficit plan is working and bringing government borrowing down," a spokesman said.
The ONS figures showed total government receipts rose 2.8 percent on the year to a record high of £60.9 billion. Total government expenditure rose at roughly the same pace.
However, local government posted a small surplus of £0.4 billion in January compared with a deficit of £1.9 billion a year ago, helping to drive the overall surplus higher.
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