The Office for National Statistics (ONS) has reported that the government’s finance showed a massive surplus last month, more than double the surplus last January. The surplus increased to £16.7bn in January, which is the difference between spending and tax income. This is the last set of public finance figures to be released before the Chancellor’s Budget in March. It remains to be seen what these figures might mean for taxation in the future.
The government may use the surplus as an argument for tax cuts. However, the surplus was lower than most economists predicted it would be. Every January, the government tends to take more in tax than it spends in other months due to the amount it receives in self-assessed taxes, according to the ONS. Moreover, the cost of financing the UK’s debt has gone down as inflation has fallen.
Overall expenditure was down compared to last year, despite increased spending on public services and benefits. One of the government’s key pledges is debt falling as a percentage of GDP in five years. Capital Economics, an economics think tank, suggested using the surplus to cut taxes amounted to “putting the election before prudence.”
The UK’s debt has risen compared to a year ago and remains at levels last seen in the early 1960s, with overall debt at around 96.5% of the size of the economy, which is measured by GDP. In the year from April 2023 public borrowing has totaled £96.6bn. It is not known yet whether the Chancellor will choose to use the surplus to cut taxes or to pay down the national debt
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