UK Government Achieves Record £30.4bn Budget Surplus in January
The UK has posted its largest ever budget surplus, with official figures revealing a staggering £30.4bn surplus in January, according to the Office for National Statistics. This marks the highest January total since records began in 1993 and represents a significant reversal from December's £11.6bn deficit. The surplus, which is £15.9bn higher than the same period last year, provides a timely boost for Chancellor Rachel Reeves ahead of her spring statement scheduled for next month.
Surplus Driven by Strong Tax Receipts and Lower Debt Costs
Grant Fitzner, chief economist at the ONS, highlighted that January is traditionally a strong month for self-assessed tax receipts, but this year's performance was exceptional. Revenue saw a substantial increase compared to last year, while spending remained relatively stable. This was largely due to lower debt interest payments, which helped offset higher costs in public services and benefits. The surplus has reduced the deficit for the first ten months of the fiscal year to £112.1bn, below the Office for Budget Responsibility's forecast of £120.4bn.
Key factors contributing to the surplus include:
- A surge in capital gains tax receipts, as many individuals disposed of assets ahead of anticipated tax increases announced in the 2024 autumn budget.
- Increases in the lower rate of capital gains tax from 10% to 18% and the higher rate from 20% to 24%, which took immediate effect.
- A freeze in income tax thresholds since 2022, pushing more people into higher tax brackets due to inflation.
- Rises in national insurance contributions introduced last April and higher wage growth.
Government's Economic Strategy and Future Plans
James Murray, Chief Secretary to the Treasury, emphasized the government's commitment to building a stronger economy. He noted that headroom has doubled, inflation is being brought down, and borrowing is projected to be the lowest since before the pandemic. However, with national debt at 92.9% of GDP—a level not seen since the early 1960s—the cost of servicing that debt remains high, consuming £1 in every £10 of government spending.
Reeves has prioritized reducing government borrowing, aiming to more than halve it by 2030-31. This would free up resources for essential services such as policing, schools, and the NHS. The unexpected surplus offers some relief, but challenges persist in managing debt interest and sustaining economic stability.
The record surplus underscores the volatile nature of public finances, influenced by tax policy changes and economic conditions. As the government prepares for the spring statement, all eyes will be on how this financial windfall is leveraged to support long-term fiscal health and public services.
