United Kingdom government surplus gives Philip Hammond pre-Budget boost

However, the surplus for January 2017 was only £300m higher than the same month a year ago, which was less than City economists had expected.

Figures published by the Office for National Statistics on Tuesday showed that between April 2016 and January 2017, the government borrowed a total of £49.3bn, 22 per cent less than during the same period in 2015-16.

With tax receipts in January traditionally far higher than every other month as self-assessment returns come in, the January surplus of £9.4bn was £300m higher than the previous year, making it the largest surplus since the turn of the millennium, the ONS said.

Changes in methodology lowered the corporate tax revenue estimate for January as receipts were smoothed over the year and the January data would have recorded a surplus of over £15.0bn under the previous accounting method.

Britain's fiscal watchdog will trim back forecasts for net borrowing by £3 billion to £65 billion for 2016/2017, while changing predictions for the United Kingdom economy to 1.7% from 1.4% for this year, according to the organisation.

Government borrowing recorded the biggest January surplus since 2000 and its lowest year-to-date reading since the financial crisis ahead of chancellor Philip Hammond's first Budget on 8 March, despite a lower-than-expected monthly surplus.

Ross Campbell, ICAEW public sector director, said: "Average net national debt is expected to grow to just under £2 trillion in the next five years and is the highest level of public indebtedness seen since the aftermath of a major world war". It climbed £92bn to £1.68tr, equivalent to 85.3% of the UK's gross domestic product.

That target looks achievable based on the latest figures.

Growth in tax receipts has been "fairly steady" since June, agrees Scott Bowman, UK Economist at Capital Economics.

Howard Archer, chief United Kingdom and European economist at IHS Global Insight, said: "This potentially gives the Chancellor some wiggle room in the Budget".

"However, in these uncertain times, the chancellor is likely to hold some ammunition back, in case the economy proves weaker in the run up to UK's departure from the European Union, so more significant policy announcements are not likely before the autumn budget in November".

"Or he could decide to give limited extra money to the NHS".

"However, he could choose to provide some modest help to households, particularly the worse off, as purchasing power is increasingly squeezed by rising inflation".

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