Official figures reveal that record tax revenues from workers and capital gain taxes were used to offset large expenditures on energy bill support and high debt interest payments.
The Office for National Statistics (ONS), which released the final set public borrowing figures just before Jeremy Hunt presents his Spring Budget, stated that the Government received PS5.4bn in taxes in January, more than it spent on public service.
This is significantly higher than the PS8bn forecast deficit by economists, and PS5bn greater than the forecast by the Office for Budget Responsibility(OBR), Government’s tax- and spending watchdog.
The Treasury typically receives more in January than it spends because businesses and workers pay their taxes.
According to the ONS, self-assessed income tax receipts totaled PS21.9bn in January. This is the highest monthly figure recorded since 1999, and three times higher than the receipts received in January last year.
Capital gains taxes are charged on the profits of disposition assets, such as buy-to -let properties, if they have increased their value. This was another record.
According to the ONS, January’s high self-assessed tax receipts in January were partially offset by substantial spending on energy support programs and large one-off payments related to historical customs duties owed towards the EU.
This includes a partial payment made to Brussels in settlement of a long-standing dispute about textiles and footwear that were imported from China to the UK.
Due to rising inflation, debt interest payments soared to PS6.7bn last January. This was the highest January figure ever recorded.
To bridge the gap between public spending and tax receipts, the Government has borrowed PS116.9bn this year. This is PS7bn higher than last year, but PS30.6bn lower than OBR forecasts.
After the October decision to subsidize energy bills, government borrowing continued to rise. The average household will pay PS2,500 per year. From April, the state will reduce its support and raise the bill cap to PS3,000.
The level of debt remains high at a historical high. The UK’s current debt share of 98.9pc is compared to the gross domestic product (GDP) in the 1960s.
As it focuses on reforms that will get more people back to work, the Treasury tried to minimize the possibility of significant tax cuts in Budget.
Mr Hunt stated that “We are spending billions of dollars now to help households and businesses deal with rising prices.” However, with debt at its highest point since the 1960s it is crucial we keep our commitment to reduce debt in the medium-term.
“Getting rid of debt will not be easy, but it is essential to reduce debt interest in order to protect public services.”