Britain posted the largest budget surplus in its history in January, supporting the Chancellor of the Exchequer, Jeremy Hunt, two weeks before his final fiscal statement ahead of general elections.
Tax receipts exceeded spending by 16.7 billion GBP (21.1 billion USD), more than double the surplus from a year earlier, the Office for National Statistics (ONS) said. The budget deficit for the first 10 months of the fiscal year stood at 96.6 billion GBP, which is 9.2 billion GBP less than the Office for Budget Responsibility forecast.
It raises the prospect of tax cuts in the spring budget as Hunt comes under pressure from the Conservative Party to defend its political power ahead of this year’s election. The Tories, in power since 2010, trail the Labor opposition in opinion polls by around 20 percentage points.
However, the government’s self-imposed fiscal rules, requiring the debt burden to fall after five years, suggest that those expecting big cuts may be disappointed.
The Office for Budget Responsibility has told Jeremy Hunt that he has no more reserves than the 13 billion GBP budgeted for in November. The third forecast in the pre-budget process was presented this week. Jeremy Hunt is already believed to be considering scaling back his already tight public spending plans to secure more extra funds.
The Chief Secretary to the Treasury, Laura Trott, dismissed the prospect of tax cuts: “We have provided hundreds of billions in wages, business support and to ease people’s electricity and gas bills since the Russian invasion of Ukraine began”, she said in a statement. “However, we cannot leave future generations to bear this burden, and so we have taken tough decisions to help reduce the debt below the Office for Budget Responsibility’s expectations in March”, added she.
Strong receipts from value-added tax (VAT), personal and corporate taxes boosted government revenue over the 10 months, while spending was supported by lower debt interest costs and the withdrawal of energy subsidies.
The national debt amounts to 2.65 trillion GBP and remains at levels last seen in the 1960s, accounting for 96.5% of gross domestic product (GDP), the ONS said.
Stand-alone receipts from income tax and capital gains totaled 33 billion GBP last month – 1.8 billion GBP less than last year.
The Treasury transferred a further 11.2 billion GBP in cash to the Bank of England to cover losses under the quantitative easing programme, bringing the total amount of payments since October 2022 to 49.4 billion GBP.
The quantitative easing program is expected to be at a net loss within a few years.
