Strong self-assessment tax receipts give Chancellor a fiscal tonic ahead of the Budget

Record tax receipts from self-assessment in January and downward revisions to previous months mean that borrowing is around £30 billion lower than the Office for Budget Responsibility’s (OBR) forecast last November for the year to date, providing a fresh tonic to the Chancellor as he prepares to deliver his Spring Budget in three weeks’ time, the Resolution Foundation said today in response to the ONS public sector finances data.

Self-Assessment tax receipts in January were the highest on record (since April 1999) at £21.9 billion, a third higher than last year and £3.6bn higher than OBR forecast. These strong receipts are partly offset by spending on energy support measures and high debt interest, meaning borrowing is still around £7 billion higher than this time last year.

These strong receipts, coupled with revised receipts for previous months, mean that with just two months of the fiscal year to go, borrowing is at £116.9 billion, £7 billion more than last year, but £30 billion below the OBR forecast borrowing profile (excluding £8.6 billion student loan differences).

The Foundation adds that falling wholesale gas prices should deliver a further fiscal boost next year, with the cost of the Energy Price Guarantee set to fall from £11.8 billion to just £1.5 billion – though the scaling back of this support will also cause household energy bills to spike in April.

Cara Pacitti, Senior Economist at the Resolution Foundation, said:

“The Chancellor is approaching his upcoming Budget with significantly healthier borrowing levels than was forecast last Autumn.

“However, with borrowing still much higher than last year, and with interest rates likely to remain elevated for some time to come, Jeremy Hunt can’t afford to be relaxed about the state of the public finances.

“The extra fiscal headroom should allow him take on some key issues however – namely corporate tax reform, boosting workforce participation and preventing a spike in energy bills this spring.”