UK finances improve in January as tax revenues growon February 22, 2022 at 8:03 am

Government finances recorded a surplus last month as the economy opened up from lockdowns and tax receipts improved.

The public finances showed a surplus of £2.9bn last month, compared with a £2.5bn deficit in January 2021.

But it was still a £7bn smaller surplus than in January 2020, before the pandemic, official figures showed.

UK finances are normally healthier in January as self-assessment income tax receipts come in.

This self-assessed tax income was £18.4bn, an increase of £2bn,the Office for National Statistics (ONS) said.

Borrowing from the end of March to January was £138.5bn – the second highest since records began in 1993.

Paul Johnson, director of the Institute for Fiscal Studies, told the BBC the figures showed “we are still spending an awful lot more. We are poorer than we were.”

But he said the bigger picture was that the deficit – the gap between spending and tax receipts – was coming down quickly. Some big tax rises this year will also mean the government borrowing less, he added.

Chancellor Rishi Sunak said the government had “provided unprecedented support” through the pandemic.

“But our debt has increased substantially and there are further pressures on the public finances, including from rising inflation,” he said.

“Keeping the public finances on a sustainable path is crucial so we can continue helping the British people when needed, without burdening future generations with high debt repayments.”

The amount of interest the government paid on its debts soared last month.

Debt repayment is pegged to the Retail Prices Index (RPI) measure of inflation – which was 7.8% in January – leading to interest payments of £6.1bn last month. That was the highest amount for a January since records began in April 1997.

It was also £4.5bn more than January last year, although below the all-time high of £9bn in June last year.

The ONS figures showed that total public sector debt stood at £2.32 trillion at the end of the month, or around 94.9% of gross domestic product.