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UK public sector surplus misses forecasts

The UK public sector spent less than it received in taxes and other income in January for the first time since the start of the pandemic.

Yet the surplus was lower than expected because of the costs for the UK government’s Covid-19 test and trace program and higher interest payments.

Public sector net borrowing was estimated to have been in surplus by £ 2.9bn last month, equivalent to £ 5.4bn less borrowing than in the same month a year ago, data from the Office for National Statistics showed on Tuesday.

This is the first surplus since January 2020, before the first restrictions were imposed. However, it was lower than the £ 3.5bn forecast by the Office for Budget Responsibility and by economists polled by Reuters.

January’s figures are boosted by many taxes due that month. The OBR forecast the public sector would borrow again in February and March.

Column chart of% of GDP, fiscal years showing UK public debt has reached levels last seen in the early 1960s

In the financial year to January, borrowing was £ 138.5bn, the second highest total since records began in 1993 but about half that posted in the same period the previous year.

Central government receipts were £ 91.6bn in January, up £ 8.6bn from the same month last year when most of the country was in lockdown, boosted by strong self-assessment income tax receipts.

At the same time, central government bodies spent £ 76.3bn, which is £ 500mn more than in January despite the end of the job support scheme.

Spending was also higher than the £ 80.7bn forecast by the OBR in October, reflecting a high cost of the test and trace program during the Omicron wave. Interest payments were also higher than expected because of surging retail price inflation, to which some government bonds are linked.

Public debt, borrowing accumulated over time, was about 95 per cent of gross domestic product, the highest ratio since the early 1960s.

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