LONDON BRIEFING:WILL there be a surprise giveaway in next month's budget? Chancellor George Osborne's wriggle-room has certainly been given a welcome boost with news that Britain's public finances for January enjoyed their biggest monthly surplus in four years.
There are two more months to go before the end of the financial year but the January figures are crucial to the chancellor’s budget sums – as well as being the most important month for tax receipts, the January data is the last we’ll see on public finances before the budget on March 21st.
The public sector surplus for January, at £7.8 billion (€9.3 billion), exceeded economists’ expectations by over £1 billion and was £2.6 billion higher than a year earlier. It takes public sector net borrowing in the financial year to date to £93.5 billion, against £109.1 billion in the comparable period a year ago. Total national debt moved back below the £1 trillion mark it breached in December, to £988.7 billion.
The January surplus puts the chancellor well on track to meet the £127 billion deficit forecast made by the independent Office for Budget Responsibility (OBR) and raises the unexpected prospect of some good news in next month’s budget.
Economists calculated that if the performance over the first 10 months of the year is replicated in the final two months, the deficit would come in at £116.4 billion – £10 billion below the OBR’s target and a substantial enough sum for the chancellor to pull some tax incentives, or much-needed measures to boost growth, out of the hat on budget day.
It’s a big “if”, however. Last year, the combined deficit in the traditionally high-spending months of February and March totalled £29 billion. And, with the credit rating agencies breathing down Britain’s neck, perhaps it makes more sense for Mr Osborne to hang on to the windfall instead.
When Moody’s issued its warning on Britain’s triple-A rating last week, Mr Osborne described it as “a reality check”, insisting that the move from the ratings agency backed his policy of focusing on deficit reduction at the expense, his critics say, of economic growth. There’s been some good news recently – the unexpectedly large rise in January retail sales released last week, for example, raised hopes that Britain may be recovering more strongly than first expected.
But gloomier news is never hard to find and, at the end of this week, economists expect the second estimate of UK GDP to confirm that the UK economy shrank by 0.2 per cent in the final quarter of last year. As ever with revisions of official stats, though, there’s always a chance of a surprise, pleasant or otherwise.
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MOIRA STUART has played her part in boosting government tax receipts, although the former newsreader has been so successful she’s also cost Her Majesty’s Revenue Customs around £55 million in late payment fines.
Ms Stuart, whose departure from the BBC a few years ago sparked a row over ageism, fronted the HMRC’s campaign to persuade self-assessment taxpayers to file their returns by the deadline of January 31st.
“Tax doesn’t have to be taxing,” she said in HMRC’s advertising campaign: the result was a near-40 per cent fall in the number of those filing late. Some 850,000 people still missed the deadline and are being fined £100 each. That was down on the 1.4 million who failed to file in time the previous year, so HMRC has taken £55 million less in fines.
It appears Stuart is pretty savvy when it comes to her own tax affairs, having set up a company that lets her escape the full effect of the top 50p tax rate, instead paying the 21 per cent corporation tax rate on some of her earnings.
It’s legal but not, perhaps, what you’d expect from the public face of HMRC. The revelation comes amid growing evidence that the practice is widespread among senior government employees.
The £182,000-a-year head of the Student Loans Company, Ed Lester, avails of a technique that saves him an estimated £40,000 a year and some senior NHS executives are also understood to be on similar arrangements.
Fiona Walsh writes for the Guardiannewspaper in London
