CHANCELLOR George Osborne received a double boost yesterday, after the government recorded its largest monthly surplus for two years, and the US treasury secretary gave a ringing endorsement of the coalition’s austerity plan.
The government’s preferred measure of borrowing, which excludes financial sector interventions, revealed a £3.7bn surplus, as tax revenues soared.
Total borrowing including interventions (PSNB) hit a surplus of £5.3bn.
Tax receipts jumped by 12.4 per cent compared to the same time last year, with corporation tax up 13.2 per cent, and income taxes up 18.9 per cent.
VAT revenue surged to £8.5bn – from £7.8bn in December – following the chancellor’s decision to hike the tax to 20 per cent from 4 January.
And Osborne’s plan to reduce Britain’s deficit — expected to hit £148.5bn this financial year, according to the government’s fiscal watchdog – was endorsed by US Treasury secretary Timothy Geithner.
“I am very impressed at the basic strategy he has adopted,” Geithner said.
“At a time when it was easier to make tough choices quickly, he locked this coalition into a set of reforms that were very good.”
However, the government’s net debt still stands at £867.2bn, 57.6 per cent of GDP, up from £720.9bn, 50.4 per cent of GDP, at the same time last year. Expenditure was up 4.4 per cent on the same time last year.
“Underlying net debt as a proportion of GDP is a relatively benign,” said Investec’s Philip Shaw, “but the debt will stay on a rising trend as the annual deficit remains high.”
“Next year’s discretionary fiscal consolidation of £41bn, 2.7 per cent of GDP, will be critical in ensuring that borrowing continues to fall,” Shaw warned.