January’s public borrowing figures, unlike most recent data, were a nice surprise. The government raked in £3.7bn more than it spent, the biggest monthly surplus since before the collapse of Lehman Brothers in 2008.
What the commentators said
January is usually a good month, as Damian Reece pointed out in The Daily Telegraph. There is traditionally a surge in self-assessment payments and corporation tax receipts. But this figure is far above the £100m or so anticipated. Tax revenues are growing faster than expenditure, which was up by an annual 4% in January, down from 10.5% last September. It looks as though the national overdraft could be £140bn in 2010-2011, rather than the £149bn expected.
These figures should allay fears that the economy is weakening again, said Stephanie Flanders on BBC.co.uk. Income and capital-gains-tax receipts grew by an annual 18%, and the corporation tax take was up 13%. “These are not numbers you would expect to see if the British economy was suffering a prolonged downward lurch.” It’s highly unlikely that growth remained negative in January after the 0.5% decline (according to the first estimate).
“There is still a long way to go in restoring the public finances to levels that are sustainable in the long term,” said Philip Shaw of Investec. We added another 10% of GDP to our debt pile in calendar 2010 – a deficit the same size as Greece’s. And “there is a real danger”, added Hetal Mehta of Daiwa Capital Markets, that subdued growth and rising unemployment will result in higher-than-expected borrowing over the next couple of years. Given all the uncertainty over the growth outlook, concluded Rowena Crawford of the Institute for Fiscal Studies, the government “might best be advised” to bank the extra money rather than indulge in giveaways in next month’s Budget.