Government on track to beat borrowing target
The government expects to either achieve or exceed its target of borrowing no more than £127bn this year, after recording its biggest surplus for four years in January.
In the tax year to date the government has borrowed £93.5bn and in January it made a net repayment of £7.75bn, excluding financial interventions.
Although a surplus is traditionally expected in January, because of an increase in tax receipts, January 2012’s result was significantly higher than the previous January’s surplus of £5.2bn.
The figures suggest that the government is making progress with a key element of its economic policy – eliminating the UK’s budget deficit.
The UK’s total public sector net debt, which went over the £1tn watermark in December, fell to £988.7bn, or 63% of gross domestic product.
There is optimism that the reduction in government borrowing could help Britain avoid losing its prestigious AAA credit rating, after ratings agency Moody’s recent warning that the rating could be reviewed.
Economists suggest that the Chancellor, George Osborne, will resist calls from Conservative Party members to reduce business taxes in the Budget, in favour of keeping a tight hold on the deficit, especially with economists warning that the economic outlook remains uncertain.
All parties are calling for tax cuts, with Labour pressing for VAT to be temporarily reduced and the Liberal Democrats wanting the Income Tax Personal Allowance to be raised.
Follow the release of January’s deficit figures by the Office for National Statistics, a Treasury spokesman said: “Our credible deficit plan is working and bringing government borrowing down.”
There is also optimism over the news that Greece has secured a bailout to avoid it defaulting on its debt.
The Chancellor said the deal was a “really significant step” towards resolving the eurozone crisis.
This would be “the biggest boost that Britain could get for its economy this year,” he continued.