Budget Responsibility Office Jeremy HuntKPMG EY ITEM Membership Club
Despite significant expenditures to assist with energy bills and EU payments, the United Kingdom government experienced an unexpected surplus in January. The highest self-assessed income tax receipts since records began in 1999 have resulted in a £5.4bn surplus for the United Kingdom. According to economists, the figures reveal a “mixed picture” with public finances still weaker than this time last year in advance of the Budget next month.
On 15 March, Chancellor Jeremy Hunt will outline his plans for taxes and spending, and due to the decline in wholesale energy prices, the government’s spending on bill assistance “will be a fraction” of what was projected last year. Public borrowing in the current fiscal year is £30.6 billion less than the Office of Budget Responsibility projected (OBR). This may encourage Mr. Hunt to include a pay raise for public sector employees in his budget next month.
Today, HMRC revealed that the amount of tax and national insurance collected thus far in the current financial year was £368.5bn, an increase of £44.9bn compared to the same period last year. Although the debt is still at its highest level since the 1960s, this provides some relief to government finances.
The increase in debt repayments, which totaled £6.7bn in January, was largely attributable to inflation, as many UK government bonds are “index-linked.” This means that repayments rise in tandem with the Retail Prices Index (RPI) measure of inflation, which is currently in double digits. According to the Office for National Statistics, approximately £3,3 billion in interest was impacted by inflation in January 2023. (ONS).
January’s unexpected surplus is good news for the government, but it is important to note that it was £7.1 billion less than the same month in 2022. With debt at its highest level since the 1960s, Chancellor Jeremy Hunt will be forced to make difficult decisions on 15 March when he unveils his tax and spending plans.
