The year-on-year decline for the UK’s public finances in February turned out to be slightly less than expected, according to the Office for National Statistics (ONS).
Data for the month suggests Rishi Sunak will likely meet the revised targets for public finances which he announced in this year’s Budget.
However, there will most likely be revisions to the data as the ONS has yet to include estimates of the likely level of write-offs from various government-backed loan schemes, which the Office for Budget Responsibility (OBR) currently estimates to be around £27.2bn.
February’s public budget deficit came to £19.1bn, which is up from a shortfall of just £1.6bn in February 2020.
The month’s increased shortfall resulted from lower tax receipts and increased government spending on measures to support the economy and jobs during the pandemic.
On the figures, Howard Archer, chief economic advisor to the EY ITEM Club, said: “The public finances saw a £19.1bn year-on-year (y/y) shortfall in February 2021. This was deeper than the very small shortfall of £1.6bn in February 2020. However, the latest shortfall was modestly less than the consensus forecast of a deficit of £21bn.
“Meanwhile, January’s shortfall was revised down to £3.1bn from the previously reported deficit of £8.8bn. Even so, this was the first January shortfall for 10 years and the largest since records began in 1993. There had been a surplus of £9.5bn in January 2019.”
He added: “The public finances normally see a surplus in January as it is a key month for tax receipts. The February public finances also tend to benefit from higher tax receipts than most months as some of the tax receipts due in January arrive late.
“The government’s measures to support businesses and jobs affected by Covid-19 have resulted in reduced receipts and substantially increased public spending. Meanwhile, Covid-19-related restrictions on activity during the fiscal year, as well as the lockdown in the first quarter, limited tax receipts in January and February.”