- Written by Lucy Hooker
- BBC News business reporter
The government's finances showed a large surplus last month, more than double the surplus in January last year.
The surplus, the difference between spending and tax revenue, rose to £16.7bn in January, according to the Office for National Statistics (ONS).
These are the last fiscal figures to be released before the Chancellor's Budget in March.
The government's fiscal surplus could add fuel to next month's tax cut debate.
However, despite the highest nominal surplus since monthly statistics began in 1993, it was lower than most economists expected.
The ONS said the surplus was the result of higher tax revenues and lower spending, for example because the government no longer subsidized household energy bills.
According to the ONS, the government tends to collect more tax in January each year than it spends in other months, as self-assessed tax payments increase.
Furthermore, the cost of financing UK debt has also fallen as inflation has fallen.
Jessica Barnaby, deputy director general for the public sector at the ONS, said: “Despite an increase in spending on public services and benefits, overall spending was down on this time last year.
Treasury Secretary Laura Trott said: “I won't speculate on whether further tax cuts are possible in the Budget, but with inflation falling from over 11% to 4%, the economy is starting to turn the corner.”
For the full year to April, the government is expected to spend £10bn less than expected. Chancellors usually allow some fiscal space for unexpected changes in economic fortunes.
Capital Economics, an economic think tank, suggested that taking advantage of the extra room for maneuver that a surplus would give the prime minister would amount to “prioritizing election over prudence”.
In the year to April 2023, public borrowing totaled £96.6bn.
The UK's overall debt is higher than a year ago, reaching around 96.5% of the size of the economy as measured by GDP, and remains at levels last seen in the early 1960s, the ONS said.
One of the government's key commitments is to reduce the debt-to-GDP ratio within five years.
