UK public sector borrowing hits £2.9bn surplus in January
Government finances hit a surplus of £2.9bn in January boosted by tax receipts as the economy opened up from lockdown.
The Office for National Statistics (ONS) said it was the first time since the pandemic began that the UK public sector spent less than it received in taxes and other income, although the surplus was lower than expected because of fast-rising inflation.
The £2.9bn surplus last month compares with a £2.5bn deficit in January 2021. But still a £7bn smaller surplus than in January 2020, before the pandemic hit.
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Tax returns brought in £18.4bn in January, compared with £16.4bn in January 2021.
In the financial year to January, borrowing was £138.5bn, the second highest since records began in 1993.
The data from the ONS also showed that total public sector debt stood at £2.32trn at the end of the month, or around 94.9% of gross domestic product.
Inflation, which is running at a 30-year high and looks set to top 7% in April, pushed up the government's bill from interest payments on debt to £6.1bn in January, an increase of £4.5bn from the same month last year.
“The extra funding required by government coronavirus support schemes, combined with reduced cash receipts and a fall in GDP, have all helped to push public sector net debt at the end of January 2022 to 94.9% of GDP, a level last seen in the early 1960s,” the ONS report said.
Chancellor of the exchequer Rishi Sunak said: “We provided unprecedented support throughout the pandemic to protect families and businesses and it has worked, with the UK seeing the fastest economic growth in the G7 last year.”
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The growth followed the fastest economic decline of any G7 nation during the pandemic.
Sunak added: “But our debt has increased substantially and there are further pressures on the public finances, including from rising inflation.
“Keeping the public finances on a sustainable path is crucial so we can continue helping the British people when needed, without burdening future generations with high debt repayments.”
Hoa Duong, economist at PwC, said: "Further savings in government spending are expected to follow as remaining financial support, such as the £500 support for self-isolation, is ending.
"This could contribute to lessening the budget burden going forward but the net impact is likely to be minimal, especially when considering other expenditures. For example, a rise in interest payments on the Government’s record debt following the recent Bank rate hike would completely wipe out these savings in less than a month.
"Therefore, in his Spring budget we expect the Chancellor to continue to prioritise balancing the books. Yet with £2.3trillion net debt the task is not without challenge, as minimising adverse impacts on household living costs remains critical in the long run both from a social and economic perspective."