Britain recorded its highest January budget surplus on record last month – but the windfall is not as large as expected. The Office for National Statistics (ONS) has estimated that the public sector was in surplus by £15.4bn in January 2025, as tax receipts exceeded government spending. That is the highest January surplus since monthly records began in 1993. This is much better than in December, when borrowing jumped by more than expected. January is usually a bumper month for tax receipts, as the deadline to file self-assessment tax returns falls at the end of the month. Unfortunately, January’s surplus is £5.1bn smaller than the £20.5bn figure the Office for Budget Responsibility had pencilled in for the month. The ONS also reports that combined self-assessed income and capital gains tax receipts were provisionally estimated at £36.2bn for January – the highest January receipts since monthly records began in 1999, and £3.8bn more than a year earlier. So far this financial year, government borrowing has now reached £118.2bn – £11.6bn more than at the same point in the last financial year and the fourth-highest financial year-to-January borrowing since monthly records began in 1993. The City consultancy Capital Economics has given a blunt verdict on January’s record budget surplus – the “bad news continues for the chancellor”. That is because Rachel Reeves’s headroom to keep within her fiscal rules has narrowed. Alex Kerr, an economist at Capital Economics, said: "While January’s disappointing public finances figures may not be as bad as they first appear, they continue the run of bad news for the chancellor in 2025 and underline the difficult choices she faces. "While there is increasing pressure on the government to commit to higher defence spending, the OBR is likely to conclude that the chancellor’s headroom against her fiscal rules has been wiped out and she will probably need to tighten fiscal policy as a result." The cost of servicing Britain’s government debt rose year on year last month, taking a bite out of the budget surplus. The interest payable on central government debt was £6.5bn in January 2025, a £2bn jump compared with January 2024. That is the second highest January figure since monthly records began in 1997, after the record bill in January 2023. It is lower than in December, though, when the interest bill hit £9bn. These figures are driven by changes in the interest rates on index-linked debt, which rises or falls in line with the RPI inflation rate. In a small fillip for the chancellor, the research group GfK has reported this morning that consumer confidence rose a little last month – but it is still weaker than a year ago. Retail sales in Great Britain rebounded surprisingly strongly last month. The ONS reports that retail sales volumes rose by 1.7% in January. This follows a fall of 0.6% in December – which has been revised down from the first estimate of a 0.3% fall. Perhaps unexpectedly, the ONS reports that food stores sales volumes rose by 5.6% compared with December (when you would expect people to be stocking up for Christmas). The agenda • 9am GMT: eurozone flash PMI report for February • 9.30am GMT: UK flash PMI report for February • 2.45pm GMT: US flash PMI report for February We'll be tracking all the main events throughout the day …
You are receiving this email because you are a subscriber to Business Today. Guardian News & Media Limited - a member of Guardian Media Group PLC. Registered Office: Kings Place, 90 York Way, London, N1 9GU. Registered in England No. 908396
