Higher tax receipts helped the public finances notch up a record surplus last month, providing some rare good news for beleaguered Chancellor of the Exchequer Alistair Darling ahead of his first Budget on March 12.
The Office for National Statistics said that tax receipts of £60.6bn far outstripped government spending of £43.1bn in January, leaving net borrowing in surplus by £14.1bn.
This was more than £4bn above forecast and an improvement of £2.3bn on last January. Analysts said the monthly surplus was the highest on record since 1963.
The statistics agency said the bumper month for public finances came as self-assessment income tax returns soared by around a quarter in January, which is a key month for tax receipts given the self-assessment deadline of January 31.
The ONS said the public sector posted a net cash repayment of £22.118bn last month, more than £2bn higher than City economists had forecast.
Despite the higher surplus, analysts in the Square Mile pointed out that borrowing for the financial year to date is still running above the total for the same point in 2007 and a slowing economy will create additional headwinds.
"The fact we got a better than expected result at the margin is good news but it doesn't factor in the slowdown in growth and the impact that will have on the public finances," said Adam Chester, an economist at Bank of Scotland.
"It doesn't get them out of the hole but it's a slight reprieve for now."
Jonathan Said, senior economist at brokerage Cebr, said: "Despite the positive month for the government's coffers, the Treasury has still borrowed £26.5bn in the year since April 2007, £6bn more than the amount borrowed between April 2006 and January 2007.
"On the current balance - which excludes investments - the Chancellor has borrowed £4.8bn more than last year.
"This means the risk of the Chancellor not meeting the golden rule is substantial."
However, a Treasury spokesman played down concerns over high levels of borrowing. He said that the Treasury was "meeting its strict fiscal rules", adding that the UK's public finances "compare favourably to other industrialised nations".
Attention will now turn to the government's net debt figures after it was announced earlier this month that Northern Rock's liabilities would be taken on to the public balance sheet.
The move to nationalise the stricken bank is expected to add £100bn to Britain's public sector debt, threatening to put the Treasury in breach of its golden borrowing rule.
Yesterday's figures do not include Northern Rock's liabilities and the ONS said that it was still calculating the exact impact, which is being backdated to last October, they will have.
Net debt last month stood at £512.4bn, equivalent to 35.9% of gross domestic product (GDP) - up from 35.5% in January 2007.
The government's sustainable investment rule dictates that debt should not be more than 40% of GDP. However, the ONS indicated in early February that Northern Rock's impact could add around 7% to the key measure, which would break the Chancellor's own rules.
It is unclear when the Northern Rock liabilities will be added to the public sector finances, with the ONS saying they will be included as soon as possible.
The net borrowing figures out today will provide some cheer, potentially putting the government's borrowing target of £38bn for the current financial year within reach.
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