Budget

Public finance deficit drops to £8.8bn

The UK’s public finance deficit showed a smaller year-on-year decline in January than anticipated from £9.6bn in 2020

The UK’s public finance deficit dropped to £8.8bn in 2020, a smaller year-on-year decline than the previously anticipated £9.6bn.

The January shortfall resulted from lower tax receipts and increased government spending on measures to support the economy and jobs.

Central government expenditure rose by 31.7%, while central government receipts fell 1% over 2020.

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Between April 2020 and January 2021, the country saw a cumulative deficit on the public finances of £270.6bn, an increase from £48.6bn over the same period the previous year.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “The public finances saw a rare shortfall in January, amounting to £8.8bn. Positively though, this was significantly below the consensus forecast of a deficit of £25.0bn.

“The public finances normally see a surplus in January as it is a key month for tax receipts. Indeed, this was the first January shortfall for 10 years and the largest since records began in 1993. There had been a surplus of £9.6bn in January 2020.”

He added: “The EY ITEM Club had been expecting the budget deficit to come in around £420bn (19.9% of GDP). 

“However, the downward revisions to earlier shortfalls this year and January’s smaller-than-expected deficit means it is now possible that PSNBex could come in just below £400bn.”

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