British Finance Minister Rachel Reeves received more bad news about public finances on Friday after January tax revenue came lower than expected, almost a month before he gave an update whether he was on the track to meet his loan targets.
Public finances usually show a surplus in January when the annual tax bill for the previous financial year fell. But the Capital Gain Income and Income Tax is under expectation, the National Statistics Office said.
Although January data shows a record of 15.4 billion pounds ($ 19.5 billion) a surplus, this is below 20.5 billion pounds written by government offices for budget responsibilities (OBR) and similar estimates in Reuters’ opinion polls.
The cumulative loan during the first 10 months of the financial year amounted to 118.2 billion pounds, the fourth highest in the record and far above 105.4 billion pounds.
The total year-to-date increase reflects the above revision for payment of debt interest in the past and downward revisions for company tax revenue and a lower January surplus than expected, said ONS.
The numbers occur after a number of economists estimate that Reeves is at risk of losing the goal of reducing debt when the OBR issues an updated loan estimate on March 26.
Matt Swannell, Head of Economic Advisory for Ey Item Club, a forecasting organization, said Reeves faced prospects to tighten public wallets immediately after next month to meet their budget targets.
“If the renewed assessment of the OBR shows that the existing head space has been used, more fiscal consolidation through tax increases or expenditure cutting may be announced in March,” said Swannell.
The first budget of Reeves in October made it only with 9.9 billion pounds of head space to meet the target of balancing daily expenses and tax revenue in the 2029-30 financial year, despite announcing the British biggest tax increase in decades.
Since the budget, loan costs have increased globally and British business sentiment and growth prospects have weakened, reflecting the reeves’ tax increase of 40 billion PON and uncertainty created by trade tariffs announced by US President Donald Trump.
After the release of Friday data, Deputy Reeves, Head of the Secretary for the Ministry of Finance Darren Jones, stressed that the government “was committed to providing economic stability and fulfilling our fiscal rules that could not be negotiated”.
Public sector net debt does not include public sector banks totaling 95.3% of the annual gross domestic product in January, 0.1 points percentage higher than the previous year and around the last level seen in the early 1960s, said ONS.
Clean Financial Liabilities Public sector – Size targeted by Reeves which includes non -liquid assets – established at 82.7% of GDP in January, up 2.0 points percentage this year.
Source: Reuters
