Public spending spree gives Sunak a £10bn headache ahead of first Budget

A public spending spree is due to push up Britain’s deficit by £10bn this year, giving new chancellor Rishi Sunak a major headache as he prepares next month’s Budget, writes Tim Wallace.

Figures show a budget surplus of £9.8bn in January, although it was down from £11.9bn a year earlier and missed forecasts of £11.4bn.

Economists believe the Government is on track to borrow up to £48bn this fiscal year, up almost £10bn from the previous 12 months. It will severely limit the space for Mr Sunak to borrow and spend more, unless he plans tax hikes or changes the rules set out by predecessor Sajid Javid, which curb borrowing for current spending.

Record employment and rising wages helped push up January’s tax haul by 3.4pc compared with a year earlier, but spending rose 3.6pc as the NHS, government departments and the EU all took more cash.

Meanwhile, the purchasing managers’ index from IHS Markit pointed to a solid start to the year for the economy.

The survey held steady at 53.3 this month, prompting forecasts of 0.2pc first-quarter growth.