Government spent more in January 2022 than during lockdown last year, says ONS
Spiralling inflation means the government spent more in January 2022 than during lockdown last year, according to new analysis of ONS figures by the Resolution Foundation, a progressive think tank.
The UK’s strong, Omicron-defying labour market recovery brought in higher-than-expected tax revenues and healthier public finances ahead of the chancellor’s spring statement next month, the Resolution Foundation said today in response to the latest ONS data.
Strong receipts – including higher than expected income taxes from self-assessment and PAYE – were £26.7 billion higher in the financial year to January than the OBR forecast, while overall borrowing was £17.8 billion lower than forecast.
Spending last month was actually higher than January 2021, despite this January not seeing the lockdowns and furlough spending of last year, as a result of debt repayments rising by £6.1 billion off the back of higher inflation.
James Smith, research director at the Resolution Foundation, said: “Britain’s Omicron-defying labour market recovery is benefitting both workers and the chancellor, with tax receipts this year so far over £25 billion higher than forecast by the OBR last Autumn.
“These strong receipts include income taxes, both via PAYE and self-assessment, reflecting a strong labour market. There are some signs of faster earnings growth for higher earners, who pay a higher marginal rate of tax.
“The warning in an otherwise welcome set of figures is the £6.1 billion increase in debt repayments stemming from higher inflation. As a result, the state actually spent more this January than during lockdown last year.”
John O’Connell, chief executive of free market campaign group the TaxPayers’ Alliance, said: “These figures show that the economy is well on its way to recovery.
“Lower than expected borrowing provides the headroom needed to offset the chancellor’s planned tax hikes and prevent them from stopping our fiscal progress in its tracks.
“The upcoming Spring Statement is the perfect time for the chancellor to go for growth by cutting taxes for taxpayers and businesses.”
