British income tax receipts jumped in January, producing the biggest monthly surplus in seven years, and finance minister George Osborne said the government was on track to meet its borrowing targets before May's national election. The Office for National Statistics reported a January public finance surplus, excluding banks, of 8.8 billion pounds, up 35 percent from a year earlier, but slightly short of a forecast surplus of 9.0 billion pounds in a Reuters poll.
January is usually a surplus month due to self-assessment tax return receipts. This year those figures were boosted by delayed payments of bonuses in the 2013/14 tax year. Income tax and capital gains tax revenues rose by 6.1 percent compared with a year earlier.
Osborne said the figures put the government on track to meet its borrowing forecasts. He was also helped by a 3.5 billion pound cut in the estimate of total borrowing for April to December.
The ONS said the revision reflected the inclusion of a European Union rebate to Britain as well as higher estimates of tax receipts and lower government spending. "(The figures) show that the economic recovery is finally having a positive impact on the public purse," said Samuel Tombs, economist at Capital Economics. Deficit reduction has been the key economic policy of the Conservative-led government since it came to power in 2010, but progress in cutting the budget gap has been slow in most of the current financial year.
Borrowing for the first 10 months of the tax year fell to 74.0 billion pounds, down 7.5 percent. In December, the government forecast 2014/15 borrowing falling by 6 percent to 91.3 billion pounds, equivalent to 5.1 percent of gross domestic product. Britain's ruling Conservative Party, led by Prime Minister David Cameron, is hoping a rapid economic upturn since mid-2013 will encourage Britons to return it to power.
Separate data showed retail sales volumes fell 0.3 percent on the month in January compared with a rise of 0.2 percent in December. Sales were up 5.4 percent compared with a year earlier. Economists polled by Reuters had expected retail sales to fall 0.2 percent on the month but rise 5.9 percent on the year. Retail sales rose strongly in the last two months of 2014, boosted by Britain's first major round of US-style Black Friday sales in November, and as shoppers bought more fuel in December on the back of falling oil prices. Wages are showing some signs of recovery after growing by less than inflation for much of the period since the financial crisis, and consumer prices are barely rising, boding well for spending power this year.