Government borrowing falls to lowest yearly level since 2001 with record January surplus

Government borrowing has fallen to its lowest year-to-date level since 2001 and recorded the largest January surplus since records began.

Public sector borrowing from April 2018 through to January was £21.2bn, the lowest at this point in the financial year since 2001, and £18.5bn less than in the previous year.

Net borrowing in January itself was in surplus by £14.9bn – a £5.6bn increase on the previous January and the highest since records began in 1993, according to the Office for National Statistics (ONS).

The bumper surplus was driven by self-assessment tax receipts – combined income tax and capital gains tax receipts totalled £21.4 billion, an increase of £3.1 billion on January 2018.

"So far the public finances seem to have been largely immune to the adverse effects of Brexit-related uncertainty, because this has mostly affected business investment," PwC chief economist John Hawksworth said.

"More tax-rich areas of economic activity, notably earnings from employment and consumer spending, have held up better over the past ten months," he added.

Economists said the figures showed that the Chancellor Philip Hammond was on track to beat the Office for Budget Responsibility's forecast of £25.5bn borrowing for the full financial year.

"This leaves borrowing in the fiscal year to date down by 46.6% compared to last year, on track to beat the OBR’s full year forecast of a 40% reduction and still leaves the Chancellor with headroom of at least £15bn relative to his fiscal rules," Thomas Pugh, from Capital Economics said.

"If a Brexit deal is secured, we think that a pickup in economic growth in 2019 will increase the size of that headroom," he added.

Pugh added that in a no-deal Brexit Hammond would have "plenty of scope" support growth.

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