Britain’s public finances posted a record monthly surplus of £30.4bn in January, according to official data, offering a boost to Chancellor Rachel Reeves ahead of her fiscal update on March 3.
The surplus exceeded all forecasts in a Reuters poll and was well above the £24.1bn projected by the Office for Budget Responsibility(OBR). Strong income tax and capital gains tax receipts, alongside lower-than-expected debt interest payments, helped drive the better-than-anticipated result. January typically records a surplus as annual self-assessment income tax payments are received.
Chief Secretary to the Treasury James Murray said the government remained focused on reducing the burden of debt interest. “We know there is more to do to stop one in every 10 pounds the government spends going on debt interest, and we will more than halve borrowing by 2030-31,” he said.
Borrowing running below forecast
Data from the Office for National Statistics showed that borrowing since the start of the financial year in April 2025 totalled £112.1bn — 11.5% lower than during the same period in 2024/25.
The figure is below the OBR’s latest forecast of £120.4bn for the period. The fiscal watchdog currently projects a full-year deficit of £138.3bn, equivalent to 4.5% of national income in 2025/26. However, earlier forecasts had suggested borrowing could fall to 3.9% of gross domestic product.
The OBR is set to publish updated growth and borrowing projections on March 3, when Reeves hopes improved fiscal headroom created in November’s Budget will help her avoid the need for mid-year policy adjustments.
Reeves has pledged to limit the government to one major fiscal event per year. From this year onward, the OBR will no longer formally assess whether the government is on track to meet its fiscal targets during the traditional mid-year review in March.
The government’s medium-term goal remains to end the use of borrowing to fund day-to-day public spending by 2029/30.
