UK public finances perk up on bumper tax receipts

UK chancellor George Osborne will have additional room for manoeuvre in fortcoming budget due next month with government finances back in the black last month, on the biggest surplus for two-and-a-half years.

Public coffers were swelled by bumper VAT and income tax receipts as higher than expected revenues came from the tax on bankers' bonuses earlier in the fiscal year.

The figures were higher than what analysts had forecast and boosted the government's claims on the economy, although it said it needed to push ahead on with planned austerity measures to bring down record debt levels.

Public sector net borrowing excluding the impact of the banking bailout, showed a surplus of £3.7 billion in January, as compared to a shortfall of £1.3 billion a year ago. With the bailout included, the surplus was even higher at £5.3 billion, since it included money paid back by the country's part-nationalised banks.

According to analysts, January usually brings a surplus as the bulk of the year's self-assessment income and corporation taxes is paid that month. January also sees more tax inflows than any other month of the year. Though self-assessment was especially strong this year revenues are expected to fall back in February.

The surplus of last month has left the deficit for the first 10 months of the fiscal year at £113 billion, £14 billion lower than the figure for last month. With the trend expected to continue, borrowing would be around £10 billion less than the forecast of the Office for Budget Responsibility at £149 billion according to analysts.