January. The month of the year when the nation is penniless and government is flush and the Treasury glutted with taxes. And this year’s haul has beaten analysts’ expectations by some margin (the average forecast worked out at £8.15bn). It’s also almost double the tax-take last year, which came in at a paltry £6.4bn.
It looks like all those finger-wagging, ‘Get your self-assessments in on time or else!’ ads have done the trick. Although, while income tax and VAT receipts show a healthy 4% growth in January this year, corporation tax receipts recorded a decline of 13% when compared with January 2012.
David Kern, chief economist at the British Chambers of Commerce, says, 'The large decline in corporation tax receipts highlights the need to support growing companies with the ability to make profit, and the lack of finance available to these companies must be urgently addressed.'
At least the Bank of England's asset purchase scheme added a much-needed £3.8bn kicker.
With two months of the tax year remaining, public finances aren’t in the black just yet. And, despite the January surplus, total borrowing is still up 1.6% on last year, hitting £93.8bn (excluding the Royal Mail pension fund transfer).
Given that government managed to borrow an eye-watering £28.6bn in the final two months of 2011, it doesn’t look good.
It is increasingly likely that government will miss its public borrowing target of £108.5bn for the year by between £5bn-£10bn. This means that the onus is now on the Chancellor to reassure the markets - and those exacting credit rating agencies – that the policies he will announce in his March Budget can revive the stagnant UK economy, and dramatically reduce government borrowing long-term. Quite the ask.
It hasn’t helped matters that the 4G spectrum auction, which took place earlier this week, failed to reach the £3.5bn forecast by the Office for Budget Responsibility. The shortfall amounted to some £1.2bn.
At last count, public sector net debt - the total amount the country owes to its creditors - stands at £1.16tn, up from £1.07tn in January last year. That’s 73.8% of UK GDP, up from 69.9% last year.
Even though public coffers are overflowing with enough loot for that famous Scrooge McDuck dive right now, borrowing is in fact rising and the economy is still on the skids. The UK's AAA credit rating is looking shakier by the day. The question is, without a viable plan to kickstart the UK economy, how long until the credit agencies’ patience runs out?