But the sustained level of high borrowing means the next government will face financial pressure to reverse any tax cuts Jeremy Hunt announces before the election, according to Ruth Gregory at Capital Economics.
She said: “February’s disappointing public finances figures suggest that the OBR’s new 2023/24 borrowing forecast published in March’s Budget already looks too optimistic. But this may not prevent the Government from squeezing in another pre-election tax-cutting fiscal event later this year.
“But a fiscal tightening will probably still be required beyond 2024. So anything the Chancellor gives away will probably be taken away once the election is over.”
Tax receipts climbed sharply as the Chancellor raked in £906.2bn over the financial year so far, a rise of £50bn on the previous year.
Income tax, which has been boosted by a stealth freeze of thresholds at a time of rising nominal pay, raised an extra £22.5bn. Corporation tax receipts climbed by £14.3bn following a steep rise in the rate last April from 19pc to 25pc.
VAT brought in an additional £9.5bn, with inflation pushing up prices and so increasing in more revenue through the tax charged at 20pc on sales.
National Insurance, which for employees is charged at a lower rate because of Jeremy Hunt’s 2p cut which came into force in January, raised an additional £1.4bn.
But spending increased far more quickly. So far this financial year the Government has spent more than £1 trillion, an increase of £69.1bn on the year.
This includes a £39.4bn rise in payments to the Bank of England’s quantitative easing scheme, which is losing money due to higher interest rates and low bond prices.
The central government’s benefits bill climbed by £33.4bn to £267.7bn, as inflation-linked payouts ballooned in the cost of living crisis.
But the end of the energy bills support scheme meant the Government shelled out less in subsidies – down £17.8bn to £27.6bn.
Lower inflation meant index-linked debt also incurred lower interest bills. So far this financial year the debt interest bill has come in at £75.2bn, down from more than £100bn over the same 11-month period a year ago.
