The government posted a smaller-than-expected surplus of £15.4 billion in January, short of economists’ forecasts of £21 billion and the £19 billion projected by the Office for Budget Responsibility (OBR).
January’s data is traditionally buoyed by self-assessment tax payments; however, the shortfall means total borrowing so far this financial year has climbed to £118.2 billion — more than £11 billion higher than last year. Analysts say the figure raises questions about the chancellor’s fiscal headroom in the run-up to next month’s spring statement.
With the debt-to-GDP ratio standing at 95.3 per cent — a level last seen in the 1960s — the OBR’s forthcoming forecasts on 26 March may downgrade the government’s ability to meet its target of reducing the debt ratio by 2029. This could compel the chancellor to consider spending cuts or tax increases in the autumn budget.
Last month’s surplus was bolstered by reduced debt-servicing costs, down from £9 billion in December to £6.5 billion. However, the impact was offset by a £6 billion one-off payment for the government’s buyback of military housing from private firm Annington.
Darren Jones, chief secretary to the Treasury, said ministers remain committed to “economic stability and meeting our non-negotiable fiscal rules”, adding that the government has commenced a line-by-line spending review for the first time in 17 years to ensure every penny is spent in line with national priorities.