British Govt gets income tax boost

Public sector finances were given a boost last month as the British government received the highest level of income tax receipts since records began more than 40 years ago, official figures showed today.

The Office for National Statistics said that tax receipts of £60.6bn (€80.1bn) far outstripped Government spending of £43.1bn (€56.9bn) in January, leaving net borrowing in surplus by £14.1bn (€18.6bn).

This is an improvement of £2.3bn (€3.04bn) on last January and the highest monthly surplus on record since 1963.

The ONS said the bumper month for public finances came as self-assessment income tax returns soared by around a quarter in January, which is a key month for tax receipts given the January 31 self-assessment deadline.

But attention will now turn to the government’s net debt figures after it was announced earlier this month that Northern Rock’s liabilities would be taken on to the public balance sheet.

The move for the soon-to-be nationalised bank is expected to add £100bn (€132.2bn) to the country’s public sector debt, threatening to put the Treasury in breach of its golden borrowing rule.

Today’s figures do not yet include Northern Rock’s liabilities and the ONS said it was still calculating the exact impact, which is being backdated to last October.

Net debt last month stood at £512.4bn (€677.5bn), equivalent to 35.9% of gross domestic product (GDP) – up from 35.5% in January 2007.

The government’s sustainable investment rule dictates that debt should not be more than 40% of GDP.

However, the ONS indicated in early February that Northern Rock’s impact could add around 7% to the key measure, which would leave the benchmark well above the government target.

It is unclear when the Northern Rock liabilities will be added to the public sector finances, with the ONS saying they will be included as soon as possible.

The net borrowing figures out today will provide some cheer, potentially putting the government’s borrowing target of £38bn (€50.25bn) for the current financial year within reach.

December’s statistics had led to fears that this goal would be missed after borrowing reached £7.8bn (€10.3bn), which was a record for the month and worse than had been expected in the City.

For the 10 months of the year so far, net borrowing totalled £26.5bn (€35bn), up £6bn (€7.9bn) on the same period in the previous year.