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UK government may beat its borrowing target

The public sector current budget was in surplus by £11.8bn in January (excluding financial interventions involving rescues in the banking sector). This was £2.5bn higher than in the previous January.

A big increase in tax receipts helped produce a large surplus in the UK's public finances in January

It is not surprising that a surplus was seen in January as this is historically a month when high tax receipts are seen due to self assessment tax returns falling due and quarterly corporation tax being paid, which help to boost government revenues. However, the extent of the surplus was a surprise reaching its highest monthly total for four years.

The government was able to make a net repayment in the month of £7.8bn, which compares with £5.2bn in January 2011.

Overall, public sector net debt at the end of January 2012 was £988.7bn which amounts to 63.0% of GDP. This compares to £869.1bn and 58.3% of GDP twelve months earlier.

In the current tax year to date, public sector net borrowing was £93.5bn which is £15.7bn lower than in the same period of 2010/11, when the cash requirement was £108.8bn.

The government has set a target for borrowing for this year of £127bn, compared to a final borrowing figure of £136bn in 2010/11, and with only two months to go in this financial year it looks as though the government may even beat its own target.

Whatever view you take on the austerity measures put in place by this government, they are managing to deliver on the promised cuts in borrowing. This in turn will help to reassure the ratings agencies such as Standard and Poor’s, which will help the UK maintain its top rating for borrowing, which in turn means that it will have to pay the lowest rates to borrow money in the markets.

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