U.K. Posts Biggest Budget Surplus Since July 2008 on Taxes

Britain posted the biggest budget surplus since July 2008 as government revenue surged in the biggest tax-collection month of the year.

Revenue exceeded spending by 3.74 billion pounds ($6 billion), compared with a deficit of 1.27 billion pounds a year earlier, the Office for National Statistics said in London today. The median of 13 forecasts in a Bloomberg survey was for a surplus of 100 million pounds. The surplus including government support for banks was 5.25 billion pounds.

Chancellor of the Exchequer George Osborne is pledging to stick to his deficit-cutting program to tackle a shortfall that’s set to reach 10 percent of economic output this year. Osborne today received a boost from his U.S. counterpart, Timothy F. Geithner, who said the cuts pose little risk to the recovery.

“The government has got the benefit of the doubt from the market, so to back down now would be the wrong decision,” Alan Clarke, an economist at BNP Paribas SA in London, said in a telephone interview before the release.

Today’s figures reflect a bumper month for tax receipts, with the government receiving a fifth of all taxes on company profits. It also gets final payments of income tax for the previous fiscal year and early payments of tax and national- insurance contributions on bank bonuses.

The statistics office said there were “healthy” receipts of self-assessed income tax in January.

Government revenue rose 12.4 percent in January from a year earlier, the most since April, with taxes on income and capital gains surging 18.9 percent. That was the biggest increase since January 2005. Spending climbed 4.4 percent.

Below Forecast

With two months of the fiscal year remaining, the deficit excluding financial interventions was 113 billion pounds. The government is on course to borrow 145.6 billion pounds for the year as a whole, 2.9 billion less than it forecast in November, the Institute for Fiscal Studies, a London-based research group, said last month.

There was a public-sector cash surplus of 14.4 billion pounds in January. Economists predicted a 6 billion-pound surplus. The central-government surplus, the measure the Treasury says most closely indicates gilt sales, was 14.7 billion pounds.

With government spending cuts eliminating more than 300,000 public-sector jobs over the next four years and inflation running at double the Bank of England target, the opposition Labour Party says the pace of fiscal tightening risks pushing the economy back into recession.

Geithner, in a BBC television interview taped Feb. 19 and shown today, said he was “very impressed” with Osborne’s budget strategy.

Asked whether the coalition’s program of spending cuts and tax increases would cut off the economic recovery, Geithner responded that it “remains to be seen but I don’t see much risk of that at the moment.” The interview took place after Group of 20 finance ministers and central bankers met in Paris to discuss ways to monitor and rebalance the global economy.