UK posts record surplus in pre-budget boost for Hammond

[LONDON] Chancellor of the Exchequer Philip Hammond received a pre-budget boost as new figures Tuesday showed Britain posted the biggest surplus for any January since at least 2001.

The £9.4 billion (S$16.592 billion) surplus compares with £9.1 billion a year earlier, the Office for National Statistics said. Revenue rose 5.3 per cent and spending increased 5.4 per cent.

The figures are restated going back to 2000 to include changes to the way corporation-tax receipts are accounted for. Under the previous system, the budget surplus in January would be £15.2 billion, the biggest since records began in 1997.

Mr Hammond announces his annual budget on March 8, and the latest figures suggest the budget deficit for the fiscal year through March is on course to come in below the £68.2 billion forecast by the Office for Budget Responsibility in November. The deficit in the first 10 months was £49.3 billion, down 22 per cent on the year.

January is the biggest tax month of the year and the Treasury received an extra boost last month as business owners paid themselves dividends early to avoid a tax hike that took effect in April last year. Self-assessed income tax rose 10 per cent on the year to almost £14 billion.

Tax revenue overall has benefitted from stronger-than-expected economic growth since the June vote to leave the European Union.

But officials expect Brexit to take a toll on the public finances. A slowdown in consumer spending now under way is likely to hit value-added tax receipts, while accelerating inflation pushes up the cost of servicing index-linked gilts.

BLOOMBERG