London: British finance minister George Osborne looks likely to miss his borrowing goals for the 2015-16 tax year after recording a smaller-than-expected surplus in January, but booming retail sales augured better for Britain’s consumer-driven recovery.
Before presenting a new budget plan on March 16, Osborne must weigh up robust domestic demand against a darkening global economic outlook that could yet exact a toll on Britain’s economic growth.
Yesterday’s official figures showed Britain’s headline budget surplus last month rose to £11.21 billion ($16bn) from £10.22bn a year ago, marking the biggest January surplus since 2008.
Still, it was some way short of the £12.65bn forecast in a poll of economists.
Deficit reduction has been the key economic policy of Osborne’s economic policy since he became finance minister in 2010, but progress in cutting the budget gap has been slow through most of the current financial year.
With central banks struggling to come up with new tools to stimulate a sputtering global economy, economic debate has focused increasingly on easing fiscal policy to boost growth – although there is no sign that will happen in Britain soon.
“Given the credibility the government has staked on reining in the public finances, it would take a pretty seismic event (in the global economy) to lead Osborne to tear up his rulebook,” economist at Investec, Chris Hare said.
Yesterday’s retail figures temporarily boosted sterling, but in recent months it has weakened, in part reflecting concerns about the economy and receding prospects of a Bank of England interest rate increase.
January is usually a surplus month for public finances due to self-assessment tax return receipts. Osborne has so far borrowed £66.5bn out of the £73.5bn goal, with two months to go.
The last time government borrowing totalled less than £7bn in the final two months of the tax year was during 2003-04, said Samuel Tombs from Pantheon Macroeconomics.
Britain’s independent budget watchdog, the Office for Budget Responsibility, said there was “considerable uncertainty” about the prospects for government borrowing in the last two months of the financial year.
The debt-to-gross domestic product ratio fell to 82.8 per cent in January, marking the first annual decrease since September 2002, based on provisional estimates of gross domestic product.
While manufacturing and trade have dragged on Britain’s economic recovery, there has been scant sign that consumer spending – boosted by historic low levels of inflation – is running out of steam.
The Office for National Statistics said retail sales volumes shot up 2.3pc in January compared with December when they fell 1.4pc, leaving them 5.2pc up on the year.