Confused by the latest economic news? Here’s how the government can make a surplus but still be in financial trouble.
In January 2025, the government recorded a surplus of £15.4 billion – meaning it took that much more in taxes than it spent. The surplus was expected because the government normally takes more in tax in January because that’s when self-assessed tax money pours in from business owners like Yr Obdt Srvt (me).
But the amount taken was less than expected because the tax receipts were lower than forecast – suggesting that the economy is weak – and because increased borrowing had led to a revision of the cost of debt interest payments over the financial year to date.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
The Office for Budget Responsibility (OBR) – the UK’s official economic forecaster – had predicted a surplus of £20.5 billion – £5.1 billion more than was actually received.
And the Office for National Statistics (ONS) said that borrowing so far this financial year between April and January was £118.2bn – £11.6bn more than at the same point in the last year and £12.8bn higher than the OBR had forecast.
Why does this matter?
It matters because Chancellor Rachel Reeves has set two “fiscal rules” for the Labour government, that are intended to make it look credible to the financial markets.
These say day-to-day government costs will be paid with tax income rather than by borrowing, and that debt will be falling as a share of national finances by the end of this parliament in the 2029/30 financial year.
Some economists have said these rules are not well-devised and predicted that Reeves would fall into difficulty.
Her Budget last October was intended to create financial “wiggle room” for her, totalling £9.9 billion according to the OBR at the time. But it also created uncertainty for businesses who she burdened with extra National Insurance costs on top of a rise in the minimum wage – this has had a dampening effect on the economy that is expected to worsen.
And now there is pressure to increase defence spending, due to uncertainty over the war in Ukraine. To this, she can reasonably expect benefit costs to be added if businesses decide to lay off large numbers of employees in order to avoid the increased costs of her NI and wage increases.
So the usual economic hotheads are saying Reeves may have to increase taxes – which she has already ruled out – or reduce government spending in order to follow her own rules (day-to-day spending should by paid from tax receipts, remember).
She has already told all government departments to submit details of ways they can reduce their spending.
Put it all together and we can reasonably expect more of the worst thing possible for the UK: austerity.
Cutting spending – especially on benefits, as we know the Chancellor is keen to do – will worsen the UK economy because it will cut back the amount of money being spent into it; people on benefits have to spend all the money they receive, simply in order to survive.
This means benefits are a safety net, not only for those who receive them, but for the the economy as a whole. Reeves would know this if she hadn’t spent her years at UK banks working in the complaints office.
This Writer thinks she – and the nation as a whole – would be far better-off holding her nerve and waiting to see what actually happens, rather than leaping to decisions that may prove harmful for everyone.
Besides, panic is not a good look for any government.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
Here’s how the government can make a surplus but still be in financial trouble
Confused by the latest economic news? Here’s how the government can make a surplus but still be in financial trouble.
In January 2025, the government recorded a surplus of £15.4 billion – meaning it took that much more in taxes than it spent. The surplus was expected because the government normally takes more in tax in January because that’s when self-assessed tax money pours in from business owners like Yr Obdt Srvt (me).
But the amount taken was less than expected because the tax receipts were lower than forecast – suggesting that the economy is weak – and because increased borrowing had led to a revision of the cost of debt interest payments over the financial year to date.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
The Office for Budget Responsibility (OBR) – the UK’s official economic forecaster – had predicted a surplus of £20.5 billion – £5.1 billion more than was actually received.
And the Office for National Statistics (ONS) said that borrowing so far this financial year between April and January was £118.2bn – £11.6bn more than at the same point in the last year and £12.8bn higher than the OBR had forecast.
Why does this matter?
It matters because Chancellor Rachel Reeves has set two “fiscal rules” for the Labour government, that are intended to make it look credible to the financial markets.
These say day-to-day government costs will be paid with tax income rather than by borrowing, and that debt will be falling as a share of national finances by the end of this parliament in the 2029/30 financial year.
Some economists have said these rules are not well-devised and predicted that Reeves would fall into difficulty.
Her Budget last October was intended to create financial “wiggle room” for her, totalling £9.9 billion according to the OBR at the time. But it also created uncertainty for businesses who she burdened with extra National Insurance costs on top of a rise in the minimum wage – this has had a dampening effect on the economy that is expected to worsen.
And now there is pressure to increase defence spending, due to uncertainty over the war in Ukraine. To this, she can reasonably expect benefit costs to be added if businesses decide to lay off large numbers of employees in order to avoid the increased costs of her NI and wage increases.
So the usual economic hotheads are saying Reeves may have to increase taxes – which she has already ruled out – or reduce government spending in order to follow her own rules (day-to-day spending should by paid from tax receipts, remember).
She has already told all government departments to submit details of ways they can reduce their spending.
Put it all together and we can reasonably expect more of the worst thing possible for the UK: austerity.
Cutting spending – especially on benefits, as we know the Chancellor is keen to do – will worsen the UK economy because it will cut back the amount of money being spent into it; people on benefits have to spend all the money they receive, simply in order to survive.
This means benefits are a safety net, not only for those who receive them, but for the the economy as a whole. Reeves would know this if she hadn’t spent her years at UK banks working in the complaints office.
This Writer thinks she – and the nation as a whole – would be far better-off holding her nerve and waiting to see what actually happens, rather than leaping to decisions that may prove harmful for everyone.
Besides, panic is not a good look for any government.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
you might also like
More mistakes in the script? Correcting Cameron’s New Year speech
Osborne wants a ‘year of hard truths’. Here’s one: He’s HIDING the truth
Divisions in Coalition as MPs demand independent inquiry on poverty