LONDON (Reuters) - Britain’s public finances showed a large surplus in January, but a restrictive treatment by official statisticians of funds transferred from the Bank of England poses an extra challenge for the government to meet its full-year budget goals.
Deficit reduction is the central economic policy of Britain’s Conservative-led coalition, which came to power in May 2010 when Britain’s budget deficit was more than 11 percent of annual economic output - one of the highest for a major economy.
The government’s preferred measure of Britain’s public borrowing, which strips out some of the effects of its bank bailouts, showed a surplus of 11.406 billion pounds in January, the Office for National Statistics said on Thursday.
This is up from 6.435 billion pounds in January 2012 and above analysts’ forecasts of a surplus of 8.15 billion.
January’s figures reflect seasonal inflows of income and corporation tax revenues as well as money from the Bank, and mask a gloomier picture for the previous nine months.
Since the start of the tax year in April 2012, borrowing has totalled 93.8 billion pounds, excluding a one-off boost from the transfer of Royal Mail pension assets.
This is 1.6 percent higher than at the same point in the 2011/12 tax year, and Osborne is likely to face a tough task to meet a full-year target of 108.5 billion pounds - roughly 7 percent of GDP - down from around 120 billion pounds in 2011/12.
Last month, the ONS reported that the budget deficit for the tax year to date was 7.3 percent up on the same point a year earlier. That figure for the first nine months of the tax year was revised down to 6.6 percent on Thursday.
Osborne will present his 2013 budget statement in less than a month, and many in the markets think that he is at risk of losing Britain’s coveted triple-A debt rating, as he has already had to push back his main deficit reduction goal by two years.
While the government has largely been able to stick to plans to curb departmental spending, a weak economy that shrank for most of 2012 has depressed tax receipts and pushed up benefit costs.
The government will benefit from some windfalls in the remainder of the financial year, however.
Around 6.4 billion pounds of interest income from the Bank of England’s 375 billion pounds of gilt holdings will lower the budget deficit before the end of the tax year - 3.8 billion pounds of which lifted January’s budget surplus, the ONS said.
However, the full-year total is less than the 11.5 billion pounds that the government’s independent budget watchdog estimated in December, as the ONS would not allow the full amount transferred to count towards reducing the budget deficit.
The government will also receive 2.3 billion pounds from the sale of next-generation mobile phone radio frequencies on Wednesday, though this less than the 3.5 billion pounds that had been pencilled in.
Nonetheless, Britain’s total net public debt, excluding the direct costs of bailing out the country’s banks, is still much higher than before the financial crisis at some 1.1628 trillion pounds or 73.8 percent of GDP.
Reporting by David Milliken and William Schomberg