Pre-Budget boost for Jeremy Hunt as government racks up record £16bn surplus in January thanks to huge tax haul and falling interest costs on debt… after BoE chief said UK already out of recession

Jeremy Hunt was handed a pre-Budget boost today as figures showed the government racking up a record surplus last month.

The public sector was £16.7billion in the black in January, more than double a year ago and the largest surplus since comparable records began in 1993.

The bumper haul was driven by a huge tax take and falling interest costs on debt, and immediate sparked calls for the Chancellor to act on the tax burden in his financial package on March 6.

It comes after the Bank of England played down the UK sliding into recession at the end of last year, with governor Andrew Bailey saying the downturn already appeared to have ended. He also argued that national insurance cuts at the Autumn Statement had not fueled inflation.

The government’s books are typically at their best in January as self-assessment tax bills are due. Although the figures were positive they were slightly below the £18.5billion anaylysts had pencilled in.

The public sector was £16.7billion in the black in January, more than double a year ago and the largest surplus since comparable records began in 1993

The bumper haul was driven by a huge tax take and falling interest costs on debt, and immediate sparked calls for Chancellor Jeremy Hunt to act on the tax burden in his financial package on March 6

It comes after the Bank of England played down the UK sliding into recession at the end of last year, with governor Andrew Bailey saying yesterday that the downturn already appeared to have ended

Jessica Barnaby, ONS deputy director for public sector, said: ‘January’s surplus is the largest in nominal terms since monthly records began in 1993, although borrowing in the year to January is only slightly lower than the same period last year.

‘Tax receipts are always higher in January than other months owing to self-assessed taxes, which often leads to a surplus.

‘Also, with recent reductions in the Retail Prices Index rate, interest payable on government gilts and without last year’s energy support schemes, overall expenditure was down on this time last year, despite increased spending on public services and benefits.

‘As a proportion of gross domestic product, public sector debt is up on the year, and remains at levels last seen in the 1960s.’

Treasury Chief Secretary Laura Trott said:

‘We provided hundreds of billions to pay wages, support business and protect lives during Covid, and to pay half of people’s energy bills after Putin’s invasion of Ukraine.

‘But we can’t leave future generations to pick up the tab, which is why we have taken tough decisions to help reduce borrowing versus what the OBR expected in March. While we will not speculate over whether further reductions in tax will be affordable in the Budget, the economy is beginning to turn a corner, with inflation down from over 11 per cent to 4 per cent.’

The Bank of England kept rates on hold at 5.25 per cent earlier this month, and struck a cautious note on when they would start bringing them down

Official figures last week showed GDP per head has been far worse than overall activity – reflecting high levels of immigration

Recovering retail sales gave a better picture of the economy last week

John O’Connell, chief executive of the TaxPayers’ Alliance said:

‘A record high tax burden is filling the Treasury’s coffers like never before, as inflation and frozen thresholds drag millions more into higher bands.

‘While debt remains a growing issue for the public finances, an even greater one is the unprecedented squeeze being exerted on household finances by the vice-like grip of increasing taxation.

‘The chancellor needs to give taxpayers the break they deserve and cut income tax at the upcoming budget.’

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