The UK government has announced an unexpected budget surplus for January despite ‘substantial spending’ on energy support schemes, record debt interest and one-off payments to the EU.

The Office for National Statistics (ONS) today reported a seasonal budget surplus of £5.42billion after the government spent less than it received in tax during the month of January.

The surplus was £7.1 billion smaller than the one recorded in January 2022 but was £5 billion larger than had been previously predicted by the Office for Budget Responsibility.

Economists were surprised by the figures, having predicted borrowing of £7.8 billion for the month, according to a consensus from Pantheon Macroeconomics.

But the ONS instead reported a record £21.9 billion of self-assessed income tax receipts for the month, which represented the highest total for January since records began in 1999.

These figures partly offset higher spending as a result of energy support for households and businesses due to rocketing prices.

‘This suggests that the Chancellor will have some wiggle-room in the budget to fund near-term tax cuts and/or spending rises,’ said Ruth Gregory, deputy chief UK economist at consultancy Capital Economics.

In January, payments to energy suppliers hit roughly £8 billion as a result of the Government’s price cap schemes.

It also confirmed that the fourth round of payments under the energy bills support scheme – which paid £400 to households over six months to help cut their bills – cost a further £1.9 billion.

Central government spending jumped by more than £20 billion to £103.6 billion for January, compared with the same month last year.

This included £6.7 billion of interest on government debt – the highest January reading since records began.

January also saw a £2.3 billion charge to the UK brought by the EU and relating to undervalued customs duties on Chinese footwear and textiles while the UK was a member state.

The higher interest payment comes after continued interest rate increases by the Bank of England. The rate is now 4%.

Chancellor Jeremy Hunt said: ‘We are rightly spending billions now to support households and businesses with the impacts of rising prices – but with debt at the highest level since the 1960s, it is vital we stick to our plan to reduce debt over the medium term.

‘Getting debt down will require some tough choices, but it is crucial to reduce the amount spent on debt interest so we can protect our public services.’

The UK’s overall national debt was almost £2.5 trillion in January, reflecting an increase of £143.4 billion compared with the previous January.

Michal Stelmach, senior economist at KPMG UK, said: ‘Government spending on subsidies – which include the energy support – so far came in £6.8 billion below the £44 billion expected by the OBR this fiscal year, suggesting that milder weather and lower demand for gas have helped keep the cost down.

‘Year-to-date borrowing has so far undershot the OBR’s forecast by £30.6 billion, which could tempt the Chancellor to offer a pay increase to public sector workers as part of his Budget next month, hoping to prevent another wave of strikes.

‘Looking ahead, we estimate that the energy price guarantee is now likely to cost only around a half of the OBR’s £12.8 billion forecast in 2023-24, thanks to lower wholesale energy prices.’

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