Tuesday, February 21, 2012
A 7.8 billion budget surplus in January
Posted by David Smith at 04:00 PM
Category: Thoughts and responses

Public sector net borrowing in January was negative by 7.8 billion - there was a budget surplus - 2.5 billion up on a year earlier and 1.5 billion better than market expectations. The Office for Budget Responsibility revised up its borrowing projection for 2011-12 in November from 122 billion to 127 billion.

That looked puzzling at the time and looks even more puzzling now. It will be disappointing if borrowing does not come in below 122 billion for 2011-12. If so, this will cast doubt on the OBR's forecasts for later years.

The OBR, here, is not quite prepared to throw the towel in yet, though it points out that to meet its forecast, borrowing for the final two months of the fiscal year will have to be 7 billion higher than a year earlier, breaking the recent trend.

The January numbers do not answer the question of whether the 50% tax rate is bringing in extra revenue. Income tax and capital gainst tax receipts were up by a modest 1.5% on a year earlier but the OBR points out the likelihood of some slippage into February (the self-assessment deadline was extended because of industrial action), which is also when financial sector bonuses tend to be paid. Even so, the 50% rate is not yet resulting in any revenue bonanza.