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Last Updated: Monday, 20 February 2006, 12:27 GMT
Record budget surplus lifts Brown
Chancellor Gordon Brown
Mr Brown is closing the gap on his budget targets
A strong surge in corporate and income tax receipts helped the government to post a record monthly budget surplus in January, official figures have shown.

The Office for National Statistics (ONS) said public coffers recorded a surplus of 12.6bn during the month.

As a result, Chancellor Gordon Brown has now borrowed 29.8bn in the 10 months to January - 200m down on the same period last year.

The news also put Mr Brown on track to meet his borrowing target of 37bn.

"This is way in excess of market expectations and suggests that the chancellor's finances will end the year in reasonable form and will certainly be a good platform for his budget on March 22," said Investec economist David Page.

The public sector posted a record net cash repayment of 21.1bn during the month - significantly above forecasts, driven mainly by a 50% rise in corporate tax receipts.

Oil boost

According to the ONS, the surge in company taxes was down to a change in the timing of when taxes are picked up from North Sea oil companies, which was set out in last year's budget.

Oil firms have also handed over significantly higher taxes and royalties this year as a result of soaring oil prices.

The Centre for Economics and Business Research (CEBR) said the jump would be welcomed by Mr Brown.

CEBR economist Simon Wallace said: "One must remember that these are only the figures of a single month, but as Gordon Brown prepares for what could be his last Budget he will be sleeping a lot easier.

"There is no longer the same pressure to cut spending or raise taxes."

Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said the chancellor was set to hit his pre-Budget forecasts.

This will be the first time he has hit his fiscal forecast since Budget 2000, he said.

But Mr Spencer said that the chancellor still faced tough times ahead, and noted that the slowdown in retail spending meant VAT receipts have shown little growth.

"The slowdown is now beginning to subdue the growth in employment and earnings, which does not bode well for next years receipts," said Mr Spencer.

"Item has consistently said that the big problem will come not this year but in 2006/07. It is unlikely that another surge in North Sea oil prices will help the Treasury to hit its optimistic forecasts for next year."

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