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Income tax and VAT receipts boost public finances

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Public finances in January grew by the largest amount in over two years.

According to the Office for National Statistics (ONS), in January the public sector net borrowing, which excludes the effects of the banking bail out, showed a surplus of £3.7 billion. A year ago, the figure was a shortfall of £1.3 billion.

The surplus, fuelled by the traditionally heavy tax month of January when self assessment payments boost the public coffers, was its highest since July 2008.

Income tax receipts rose to £32.2 billion in January, up from £27.4 billion during the same period in 2010.

Meanwhile, the VAT increase, up from 17.5 per cent to 20 per cent as of 4 January, saw a £900 million lift in the tax take, which rose to £8.5 billion from the £7.6 billion recorded 12 months ago.

Last month’s surplus means that the budget deficit for the first ten months of the fiscal year stands at £113 billion, down £14 billion on the previous year. Should the trend continue, then public borrowing will probably achieve a £10 billion improvement on the £149 billion forecast for the financial year by the Office of Budget Responsibility.

A Treasury spokesman said: “It’s welcome that this January saw the first surplus for the public finances in two years, but it will take more than one month to deal with borrowing of almost £150bn for this financial year. The government is determined to stay the course to deal with this unsustainable borrowing, and keep Britain out of the financial danger zone.”