Revenue fall limits Sunak for Budget

GOVERNMENT tax revenues have been hit by the stagnating economy, data from the Office for National Statistics is expected to show on Friday.

According to economists, the ONS will say that the Exchequer will record a budget surplus of £11.35billion for January, down from the record £14.9billion that it recorded for the same month last year.

They believe the reduction in cash coming into the Treasury coffers last month is down to the British economy’s struggles during the fourth quarter. According to the ONS’S initial estimates, gross domestic product was flat during the fourth quarter.

Paul Dales, chief UK economist at Capital Economics, said: “The Government typically runs a large surplus in January as self-assessed income and capital gains taxes are paid. The weak economy in the fourth quarter could have weighed on these receipts.” In a note to clients, Barclays economists Fabrice Montagne and Abbas Khan wrote that as official spending was higher than expected during the fourth quarter, falling revenues may limit new Chancellor of the Exchequer Rishi Sunak’s room for manoeuvre with spending giveaways at the next Budget.

They said: “The condition of the public finances may influence the ability of the Government to implement looser fiscal policies at the Budget.”

Also, on Tuesday the ONS is tipped to say that average wage growth in December slowed from 3.2 to 3 per cent, while the following day, inflation, as measured by the consumer price index, is tipped to go up from 1.3 to 1.6 per cent.